Which of the following is correct concerning federal aid to the states? (List the letters of all the correct answers. If none are correct, write “none”.)

(a) In the 1960s, the pattern was for the federal government to impose national preferences on the states without providing more aid. Indeed, they threatened to withdraw existing aid if additional requirements were not met.

(b) Since 1980, the national government has increasingly sought to buy state compliance with federal objectives. New federal money has been available to states that agreed to conform to federal preferences.

Several years ago a well-known public official left Illinois and moved to Texas.  A local regional reporter revealed both his regional chauvinism and his feelings about the official when he remarked that “on this occasion he raised the mean IQ in both states”.

Such a statistical change is possible. Explain how.

Considering this, and since the mean IQ of the US is the average of the means of all the states, it appears that by a mere reshuffling of populations between states, one could increase the mean IQ of the U.S! Is this so? Explain.

The Affordable Care Act (ACA) encouraged states to expand their eligibility for Medicaid by providing government subsidies to those states that participated. The subsidies awarded were for the first few years of Medicaid expansion.

1. Explain this process of Medicaid expansion as a result of the ACA.

2. Identify those states that did not expand their Medicaid programs. Choose one state and provide an explanation of why they did not expand their Medicaid program with your opinion as to whether you agree with the state’s decision. Defend your position.

Justify your answers with research and reasoning.

In Florida, it is against the law to sell essential commodities like food, water, ice, chemicals, and petroleum products at "unconscionable prices" during states of emergency.

This law, and laws like it in many other states or municipalities, are often referred to as anti-price gouging laws.

A) Based on the resources provided in the course, do such laws exacerbate shortages?

B) Do such laws make it easier for people to hoard or buy more than they need during states of emergency?

C) should businesses be allowed to raise prices on essential commodities?

Blossom Company sells goods that cost $250,000 to Ayayai Company for $400,000 on January 2, 2020. The sales price includes an installation fee, which is valued at $41,000. The fair value of the goods is $369,000. The goods were delivered on March 1, 2020. Installation is considered a separate performance obligation and was completed on June 18, 2020. Under the terms of the contract, Ayayai Company pays Blossom $250,000 upon delivery of the goods and the balance at the completion of the installation.

Using the five-step process for revenue recognition, determine when and how much revenue would be recognized by Blossom. Assume IFRS is followed. (Round percentage allocations to 2 decimal places, 15.25 and final answers to 0 decimal places, e.g. 5,275.)

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List of Accounts

Prepare the journal entries for Blossom on January 2, March 1, and June 18, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

The following facts relate to Novak Corporation.

A. Compute income taxes payable for 2020.

B. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

C. Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Metlock Inc., a registered broker, enters into a finder’s fee agreement with HOM Homes Ltd. on June 15, 2020. Metlock will find leads in the form of buyers potentially interested in purchasing HOM’s real estate holdings. Along with finding potential buyers, Metlock helps negotiate the selling price and provides advice on contract details. If and when HOM closes a sale, Metlock will be paid within 30 days of the closing date, based on the following formula: 5% of any transaction value up to and including $1 million, plus 4% of any transaction value greater than $1 million and less than and including $2 million, plus 3% of any transaction value greater than $2 million and less than and including $3 million, plus 2% of any transaction value greater than $3 million and less than and including $4 million, plus 1% of any transaction value in excess of $4 million. If Metlock is represented by another broker and this information is not shared with HOM, the fee is reduced by 50%. On September 1, 2020, HOM paid Metlock $51,000 to provide some needed cash flow for seeking out buyers. On October 15, 2020, an offer was made and accepted for a parcel of real estate at a price of $3.50 million. The transaction closed on November 1, 2020, and Metlock was paid the finder’s fee net of $51,000 on November 30, 2020.

Determine the accounting treatment of the above events for Metlock Inc. and prepare any journal entries needed on: (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

List of Accounts

• Accounts Payable
• Accounts Receivable
• Advertising Expense
• Allowance for Doubtful Accounts
• Allowance for Sales Returns and Allowances
• Cash
• Commission Expense
• Commission Revenue
• Compensation Expense
• Consignment Sales
• Construction Expenses
• Contract Asset/Liability
• Cost of Goods Sold
• Estimated Inventory Returns
• Interest Expense
• Interest Income
• Interest Payable
• Interest Receivable
• Inventory
• Inventory on Consignment
• Loss from Long-Term Contracts
• Materials, Cash, Payables
• Miscellaneous Expense
• No Entry
• Notes Receivable
• Office Expense
• Refund Liability
• Rent Revenue
• Returned Inventory
• Revenue from Consignment Sales
• Revenue from Long-Term Contracts
• Sales Discounts
• Sales Discounts Forfeited
• Sales Returns and Allowances
• Sales Revenue
• Service Revenue
• Unearned Rent Revenue
• Unearned Revenue
• Utilities Expense
• Warranty Expense
• Warranty Liability
• Warranty Revenue

3. John Deere is operated as a C corporation. The company received an order for a $12,000 tractor from a customer on June 30, 2020 and delivered the tractor to the customer on July 31, 2020. The company sent the customer a bill saying they had to pay for the tractor by no later than January 31, 2021. John Deere uses a calendar year tax period. Based on phone calls with the customer in December of 2020, the customer explained that it may have to file bankruptcy proceedings but was trying to work its way out of financial hardship before taking that option. The customer said that at worst it would be able to pay at least $9,000 of the bill. On January 15, 2021, John Deere received a check from the customer for $9,000 and was informed it would receive no additional payment based on the outcome of the bankruptcy case. In addition to the transaction above, the following occurred:

• A different customer paid for the same type of tractor (at $12,000) on November 1, 2020 and scheduled delivery for January 15, 2021. John Deere included the income in its 2020 financial accounting statements.
• The company both incurred and paid expenses for the following in 2020:
  • Wages:                                                                               $3,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $2,000
• The company both incurred and paid expenses for the following in 2021:
  • Wages:                                                                               $4,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $3,000

1. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
2. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
3. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
4. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
   
   
   
   
   
   
   
5. (8 points) How should the sum of the 2020 and 2021 accrual method net profit (loss) total relate to the sum of the 2020 and 2021 cash method net profit (loss) total (i.e. how should the sum of your answers in a. and b. relate to the sum of your answers in c. and d.)?
   Circle the best answer below.
   i. The sum of the two years for the accrual method should be greater than the sum of the
       two years under the cash method.
   ii. The sum of the two years for the accrual method should be less than the sum of the
       two years under the cash method.
   iii. The sum of the two years for the accrual method should be equal to the sum of the
       two years under the cash method.
   

Consider each of the following independent and material situations. In each case:

• the financial report date is 31 December 2019;

• the field work was completed on 12 February 2020;

• the directors declaration and the audit report were signed on 19 February 2020; and

• the completed financial report accompanied by the signed audit report were mailed to shareholders on 18 March 2020

A. You are an auditor pf PP Limited (PP), a company specialising in industrial property development. On 10 February 2020, you become aware that a major overseas investor has informed the management of PP of their intention to withdraw their investment in a proposed major development. On the basis of its discussions with the investor and previously pledged funds from them, PP has incurred substantial costs in feasibility studies, structural engineering reports and architectural plans. A significant portion of these costs has been capitalised. The management is dependent on finding a new investor to be able to meet these expenses and to continue with the project.

B. You are the auditor of XY Limited (XY), a manufacturing client. XY has plans to upgrade its manufacturing process and plans to finance this by a sale of property which is superfluous to its needs, situated next to its head office. The property has been subdivided for the purposes of the sale and placed on the market in December 2019. On 25 January 2020, the state government approved a plan for the construction of an express freeway. The plan will result in the appropriation of a portion of the property owned by XY and subdivided for the purpose of sale. Construction of the freeway will begin in late 2020. No estimate of the compensation payment is available.

C. You are an auditor of Q limited (Q), a major public company involved in the property development industry. Prior to signing your audit report you sought a letter of comfort from Q’s bankers that the bank would continue to support Q by providing finance over the coming year. The bank agrees that it would continue to provide finance. It was your view that without such support Q had severe cash flow problems and the financial report would need to be modified with respect to a going concern assumption. On 15 March 2020, the company’s bankers wrote to you advising that the company had breached its loan covenant with the bank in February 2020 and that the loan facility was now due and payable and would not be renewed.

D. You are the auditor of Turbo Limited (Turbo), a professional services client. On 15 January 2020, Turbo settled and paid a personal injury claim to a former employee as the result of an accident that occurred in September 2017. The company had not previously recorded a liability for the claim. E. You are the auditor of Charge Limited (Charge), an automobile parts manufacturer. On 2 February 2020, Charge agreed to purchase for cash the outstanding shares of Electronic Fuel Injection Limited. The acquisition is likely to double the sales volume of Charge.

Required: For each of the events A to E:

1. Outline the required treatment in the financial report, if any. Justify your answer.

3. John Deere is operated as a C corporation. The company received an order for a $12,000 tractor from a customer on June 30, 2020 and delivered the tractor to the customer on July 31, 2020. The company sent the customer a bill saying they had to pay for the tractor by no later than January 31, 2021. John Deere uses a calendar year tax period. Based on phone calls with the customer in December of 2020, the customer explained that it may have to file bankruptcy proceedings but was trying to work its way out of financial hardship before taking that option. The customer said that at worst it would be able to pay at least $9,000 of the bill. On January 15, 2021, John Deere received a check from the customer for $9,000 and was informed it would receive no additional payment based on the outcome of the bankruptcy case. In addition to the transaction above, the following occurred:

• A different customer paid for the same type of tractor (at $12,000) on November 1, 2020 and scheduled delivery for January 15, 2021. John Deere included the income in its 2020 financial accounting statements.
• The company both incurred and paid expenses for the following in 2020:
  • Wages:                                                                               $3,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $2,000
• The company both incurred and paid expenses for the following in 2021:
  • Wages:                                                                               $4,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $3,000

1. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
2. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
3. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
4. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
   
   
   (8 points) How should the sum of the 2020 and 2021 accrual method net profit (loss) total relate to the sum of the 2020 and 2021 cash method net profit (loss) total (i.e. how should the sum of your answers in a. and b. relate to the sum of your answers in c. and d.)?
5. Circle the best answer below.
   i. The sum of the two years for the accrual method should be greater than the sum of the
       two years under the cash method.
   ii. The sum of the two years for the accrual method should be less than the sum of the
       two years under the cash method.
   iii. The sum of the two years for the accrual method should be equal to the sum of the
       two years under the cash method.