Module 7 &8: Management Issues for Non-Depository Institutions
The Save You Insurance Company has the following financial statements. 2020 2019
Net Premiums Written 48,612 47,398
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Income Statement ($ mils.)
Premiums Earned 42,624 48,321
Loss Expenses 30,746 34,364
Operating Expenses 17,720 17,693
Total Policy Expenses 48,466 52,057
Net Underwriting Gain/Loss (5,842) (3,736)
Net Investment Income 15,700 19,995
Operating Income before taxes 9,858 16,259
Dividends to Policyholders 6,517 10,361
Income Tax 1,294 1,670
Net Income $2,047 $ 4,228
Ave Investment Yield 4.94% 5.89%
(mils.) 2020 2019
Total Assets $381,972 $406,529
Liabilities
Total Liabilities $349,069 $369,700
Total Equity 32,903 36,829
Total Liabs. & Equity $381,972 $406,529
Dupont Analysis:
Asset Turnover
Net Profit Margin
ROA
ROE
OROA
Equity Multiplier (EM)
Give an overview for why the insurance companies overall profitability changed in 2020 including trends in the expense ratio, loss ratio, and combined rate, and average investment yield. Also do a Dupont analysis explaining why the ROE and ROA for the insurance company changed in 2020 (based on the Operating Profit Margin, Asset Utilization, and the Equity Multiplier.
In: Finance
Mike's Company purchased equipment that cost $118,000 on August 1, 2018. The equipment has an estimated useful life of eight years with an estimated salvage of $10,000. Mike's Company has a December 31 year-end. Calculate the following, showing all of your computations well-labeled and in good form under each of the followingindependent scenarios:
1. The equipment is depreciated using machine hours. The machine is expected to be used for a total of 110,000 hours over it estimated useful life. The following hours of usage were recorded in 2018, 2019, and 2020:
2018 2019 2020
6,000 hours 13,000 hours 12,000 hours
(a) Calculate the depreciation for 2019 using the above data.
Round to the nearest hundredth.
(b) Calculate the book value on the machine at December 31,
2020.
Straight-line method.
(a) Calculate the depreciation for 2019 using the above
data.
(b) Calculate the book value on the machine at December 31,
2020.
Sum-of-the-years’ digits method
(a) Calculate the depreciation for 2019 using the above data.
(b) Calculate the book value on the machine at December 31, 2019.
Double declining-balance method. Round your calculations to the nearest dollar.
(a) Calculate the depreciation for 2019 using the above
data.
(b) Calculate the book value on the machine at December 31,
2019.
In: Accounting
Chapter 16- prob. 7
Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2018 through 2021 except for differences in depreciation on an operational asset. The asset cost $290,000 and is depreciated for income tax purposes in the following amounts:
2018 $ 95,700
2019 127,600
2020 43,500
2021 23,200
The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes.
Income amounts before depreciation expense and income taxes for each of the four years were as follows:
2018 2019 2020 2021
Accounting income before taxes and depreciation $155,000 $175,000 $165,000 $165,000
Assume the average and marginal income tax rate for 2018 and 2019 was 30%; however, during 2019 tax legislation was passed to raise the tax rate to 40% beginning in 2020. The 40% rate remained in effect through the years 2020 and 2021. Both the accounting and income tax periods end December 31.
Required: Prepare the journal entries to record income taxes for the years 2018 through 2021. (If no entry is required for a transaction/event, write “No journal entry required” in the first account field.)
|
Date |
General Journal |
Date |
Credit |
In: Accounting
Laura Leasing Company signs an agreement on January 1, 2020, to
lease equipment to Novak Company. The following information relates
to this agreement.
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1. |
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. |
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2. |
The fair value of the asset at January 1, 2020, is $74,000. |
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3. |
The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $8,000, none of which is guaranteed. |
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4. |
The agreement requires equal annual rental payments of $22,886.45 to the lessor, beginning on January 1, 2020. |
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5. |
The lessee’s incremental borrowing rate is 4%. The lessor’s implicit rate is 3% and is unknown to the lessee. |
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6. |
Novak uses the straight-line depreciation method for all equipment. |
Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round answers to 2 decimal places, e.g. 5,265.25. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
In: Accounting
Problem 16-1 Single temporary difference originates each year for four years [LO16-1]
Alsup Consulting sometimes performs services for which it
receives payment at the conclusion of the engagement, up to six
months after services commence. Alsup recognizes service revenue
for financial reporting purposes when the services are performed.
For tax purposes, revenue is reported when fees are collected.
Service revenue, collections, and pretax accounting income for
2017–2020 are as follows:
| Service Revenue | Collections | Pretax Accounting Income |
|||||||
| 2017 | $ | 718,000 | $ | 698,000 | $ | 270,000 | |||
| 2018 | 830,000 | 840,000 | 335,000 | ||||||
| 2019 | 795,000 | 775,000 | 305,000 | ||||||
| 2020 | 780,000 | 805,000 | 285,000 | ||||||
There are no differences between accounting income and taxable
income other than the temporary difference described above. The
enacted tax rate for each year is 40%.
(Hint: You may find it helpful to prepare a schedule that shows the
balances in service revenue receivable at December 31,
2017–2020.)
Required:
1. Prepare the appropriate journal entry to record Alsup's 2018
income taxes, Alsup’s 2019 income taxes and Alsup’s 2020 income
taxes. (If no entry is required for a transaction/event, select "No
journal entry required" in the first account field. Enter your
answers in thousands.)
In: Accounting
Rodriquez Corporation’s comparative balance sheets are presented below:
|
RODRIQUEZ CORPORATION |
||||||
|
2020 |
2019 |
|||||
| Cash |
$16,700 |
$17,600 |
||||
| Accounts receivable |
24,900 |
22,000 |
||||
| Investments |
19,850 |
16,250 |
||||
| Equipment |
59,950 |
69,950 |
||||
| Accumulated depreciation—equipment |
(14,050 |
) |
(10,300 |
) |
||
| Total |
$107,350 |
$115,500 |
||||
| Accounts payable |
$14,650 |
$11,050 |
||||
| Bonds payable |
10,500 |
30,000 |
||||
| Common stock |
49,900 |
44,900 |
||||
| Retained earnings |
32,300 |
29,550 |
||||
| Total |
$107,350 |
$115,500 |
||||
Additional information:
| 1. | Net income was $18,650. Dividends declared and paid were $15,900. | |
| 2. | Equipment which cost $10,000 and had accumulated depreciation of $1,700 was sold for $3,400. | |
| 3. | No noncash investing and financing activities occurred during 2020. |
Prepare a statement of cash flows for 2020 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000, or in parenthesis e.g. (15,000).)
|
RODRIQUEZ CORPORATION |
||
Compute free cash flow. (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
| Free cash flow |
$ |
In: Accounting
On January 1, 2019, Garner issued 10-year, $200,000 face value, 6% bonds at par. Each $1,000 bond is convertible into 30 shares of Garner $2 par value common stock. The company has had 10,000 shares of common stock (and no preferred stock) outstanding throughout its life. None of the bonds have been converted as of the end of 2020. (Ignore all tax effects.)
Requirement 1: Accounting
Requirement 2: Analysis
Show how Garner will report income and EPS for 2020 and 2019. Briefly discuss the importance of GAAP for EPS to analysts evaluating companies based on price-earnings ratios. Consider comparisons for a company over time, as well as comparisons between companies at a point in time.
In: Accounting
ANSWER QUESTION (5 ) I BOLD IT
Chapter 15: Product Development and Supply Chain Management
COVID 19 health crisis that we all are experiencing is giving us a healthy dose of reality to understand the importance of this chapter. Some pharmaceutical companies are racing to develop vaccines and drugs for this epidemic, and others are racing against the clock to produce ventilators and other critical equipment to deal with this public health crisis. Retailers are struggling to move supplies and fill the shelves to meet our needs: food, medicine, toilet papers, sanitizers, and the list can go on. Government agencies at all levels are watching and trying to protect against so-called “entrepreneurs” that are moving supplies to geographies where they can capitalize and earn more dollars.
Again, given the time constraints, we will focus on the following points:
I highly recommend that you read the whole chapter to get the full benefit. Your assignment is to discuss the following:
In: Operations Management
ANSWER QUESTION 4
Chapter 15: Product Development and Supply Chain Management
COVID 19 health crisis that we all are experiencing is giving us a healthy dose of reality to understand the importance of this chapter. Some pharmaceutical companies are racing to develop vaccines and drugs for this epidemic, and others are racing against the clock to produce ventilators and other critical equipment to deal with this public health crisis. Retailers are struggling to move supplies and fill the shelves to meet our needs: food, medicine, toilet papers, sanitizers, and the list can go on. Government agencies at all levels are watching and trying to protect against so-called “entrepreneurs” that are moving supplies to geographies where they can capitalize and earn more dollars.
Again, given the time constraints, we will focus on the following points:
I highly recommend that you read the whole chapter to get the full benefit. Your assignment is to discuss the following:
ANSWER QUESTION 4
In: Operations Management
(a) Prepare a Statement of Cash Flows for the year ended 30 June 2020 using the direct method, ignoring GST.
Show all workings on the Workings page.
(b) Using the relevant information from the question above, identify two (2) specific items (including their values) which causes a difference between Net Profit and Net Cash from Operating Activities and analyse why it causes a difference.
The following financial statements relate to Clarke Ltd for the financial year ended 30 June 2020.
Balance Sheet as at 30 June
| 2020 | 2019 | |
| ASSETS | $ | $ |
| Current Assets | ||
| Cash | 212,500 | 176,000 |
| Accounts Receivable | 100,000 | 200,000 |
| Allowance for Doubtful Debts | (10,000) | (5,000) |
| Inventory | 45,000 | 42,000 |
| Prepaid rent | 5,000 | 2,500 |
| Total current assets | 352,000 | 415,000 |
| Non-Current Assets | ||
| Land | 550,000 | 500,000 |
| Equipment | 900,000 | 800,000 |
| Accumulated Depreciation - Equipment | (650,000) | (560,000) |
| Total non-current assets | 800,000 | 740,000 |
| TOTAL ASSETS | 1,152,500 | 1,155,500 |
| LIABILITIES & EQUITY | ||
| Liabilities | ||
| Accounts Payable | 45,000 | 35,000 |
| Wages Payable | 30,000 | 15,000 |
| Income Tax Payable | 28,000 | 24,000 |
| Loan Payable | -- | 400,000 |
| Total liabilities | 103,000 | 474,000 |
| Owner's Equity | ||
| Share Capital | 750,000 | 500,000 |
| Retained Profits | 249,500 | 181,500 |
| Revaluation Surplus | 50,000 | 0 |
| Total Equity | 1,049,500 | 681,500 |
| TOTAL LIABILITIES AND EQUITY | 1,152,500 | 1,155,500 |
Clarke Limited's Income Statement for the year ended June 2020
| Revenue | $ |
| Net Sales | 750,000 |
| Cost of Sales | 225,000 |
| Gross Profit | 525,000 |
| Expenses | |
| Wage expense | 300,000 |
| Depreciation Expense - Equipment | 90,000 |
| Bad Debt Expense | 10,000 |
| Rent expense | 4,000 |
| Interest expense | 3,000 |
| Total expenses | 407,000 |
| Net Profit Before Tax | 118,000 |
| Income Tax Expense | 35,400 |
| Net Profit After Tax | 82,600 |
Additional information:
Interest expense is classified as an operating cash flow.
The company paid dividends in 2020.
Land was revalued during the 2020 financial year.
In: Accounting