Additional information from the accounting records:

1. Investment revenue includes Arduous Company’s $6 million share of the net income of Demur Company, an equity method investee.
2. Treasury bills were sold during 2021 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
3. Equipment originally costing $70 million that was one-half depreciated was rendered unusable by a flood. Most major components of the equipment were unharmed and were sold for $17 million.
4. Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $3 million.
5. The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.
6. Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.
7. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $82 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2021.
8. $60 million of bonds were retired at maturity.
9. In February, Arduous issued a 5% stock dividend (4 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.
10. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.

Required:
Prepare the statement of cash flows for Arduous Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

8.

value:
10.00 points

Required information

1）ABC Company entered into the following transactions during
May, its first month of operations:

May 1:   ABC Company sold common stock to owners in the
         amount of $200,000.

May 1:   ABC Company paid $36,000 cash for office rent
         for May, June, and July.

May 3:   ABC Company purchased a parcel of land costing
         $60,000 by paying $25,000 in cash and agreeing
         to pay the remainder within sixty days.

May 9:   ABC Company provided $23,000 of services to a
         customer. The customer didn't pay any cash on
         May 9, but agreed to pay the balance due by the
         end of the month.

May 15:  ABC Company received and paid utility bills in
         the amount of $14,000.

May 18:  ABC Company sold the land purchased on May 3 for
         $79,000 cash.

May 21:  A customer paid $20,000 cash to ABC Company for
         services to be provided in June and July.

May 27:  The customer from May 9 paid the amount owed to
         ABC Company.

May 31:  ABC Company received a $9,000 bill for advertising
         done during May. No payment was made at this time.

The immediate effects on the balance sheet of the May 15
transaction would be:

assets = decrease; liabilities = no effect; equity = decrease

assets = decrease; liabilities = no effect; equity = no effect

assets = no effect; liabilities = increase; equity = decrease

assets = no effect; liabilities = no effect; equity = no effect

assets = decrease; liabilities = increase; equity = decrease

assets = decrease; liabilities = decrease; equity = no effect

assets = decrease; liabilities = increase; equity = no effect

2）Jay Corporation reported the following account balances

at December 31, 2023:

Interest Revenue          $48,000
Notes Payable             $55,000
Depreciation Expense      $10,000
Common Stock              $82,000
Wage Expense              $16,000
Equipment                 $27,000
Patent                    $51,000
Income Tax Expense        $12,000
Accounts Receivable       $58,000
Cost of Goods Sold        $63,000
Loss on Sale of Land      $18,000 
Retained Earnings         $75,000  (at January 1, 2023)
Trademark                 $13,000
Accumulated Depreciation  $15,000
Cash                      $39,000
Accounts Payable          $45,000
Inventory                 $69,000
Dividends                 $11,000
Sales Revenue             $96,000
Supplies                  $29,000

The total long term assets reported by Jay Corporation
at December 31, 2023 was equal to:

Group of answer choices

$76,000

$69,000

$105,000

$12,000

$91,000

$106,000

none of the above are correct

3）

Jay Corporation reported the following account balances
at December 31, 2023:

Interest Revenue          $48,000
Notes Payable             $55,000
Depreciation Expense      $10,000
Common Stock              $82,000
Wage Expense              $16,000
Equipment                 $27,000
Patent                    $51,000
Income Tax Expense        $12,000
Accounts Receivable       $58,000
Cost of Goods Sold        $63,000
Loss on Sale of Land      $18,000 
Retained Earnings         $75,000  (at January 1, 2023)
Trademark                 $13,000
Accumulated Depreciation  $15,000
Cash                      $39,000
Accounts Payable          $45,000
Inventory                 $69,000
Dividends                 $11,000
Sales Revenue             $96,000
Supplies                  $29,000

The total stockholders' equity reported by Jay Corporation
at December 31, 2023 was equal to:

$189,000

$157,000

$82,000

$146,000

$171,000

$252,000

none of the above are correct

Auditing is a valuable skill in accounting and business, as the odds are very high that you or your organization will be subject to a compliance, federal, IRS, internal, government, or revenue audit at one point in your career. Accountants are required to make professional judgments on both the financial accounting issues and internal accounting forecasts within their organization. The auditor must provide fair, unbiased, materially correct information for investors, employers, employees, and independent stakeholders. This course will help you navigate the relevant processes to provide that unbiased, accurate information.

The purpose of the assessment is to familiarize you with the process of auditing and what to do with the auditing information once you have it. You will explore how to plan audit work, analyze financial statements, perform tests on that information, and properly and professionally communicate the results of an audit.

For this assessment, you should assume you are on the internal audit staff of a publicly traded company. Choose one of the following companies: Walmart, Target, Sears, Kroger, or Amazon. You will be required to obtain the last two years’ worth of financial statements and a recent audit report. The internal audit group at the company is tasked with preparing for an upcoming revenue audit and analyzing the business risk internally to mitigate audit findings. You will conduct an internal audit of the company using the information gathered and create a report. Then, you will prepare appropriate memos analyzing the audit report you have prepared, while offering feedback and recommendations.

For Milestone One, you will submit a draft of the procedures and field work required for conducting your audit process. Describe how you would conduct the audit process for the company you have chosen, including the analytical procedures you would use to investigate selected business transactions. Explain the appropriate field work needed to review high-risk business transactions for cash and revenue, and create a test to assess appropriate assertions for designated high-risk business transactions.

Prompt: Outline the field work and procedures that will be involved in conducting the internal audit report and explain how you intend to communicate your findings. Create a test to assess appropriate assertions for designated high-risk business transactions.

Specifically, the following critical elements must be addressed:

A. Describe how you would conduct the audit process, incorporating the analytical procedures you would use to investigate selected business transactions.

1. What steps will you take to review the company’s business transactions?

2. What would your plan be to utilize these procedures?

B. Explain the appropriate field work needed to review high-risk business transactions for cash and revenue.

1. What would you need to do in the field to investigate these?

2. Could you convey this information through charts or other supporting documentation?

C. Create a test to assess appropriate assertions for designated high-risk business transactions.

Guidelines for Submission: Your paper must be submitted as a 3–4-page Microsoft Word document with double spacing, 12-point Times New Roman font, oneinch margins, and at least three sources cited in APA format.

Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $5.60 per case, has not had the market success that managers expected and the company is considering dropping Bubbs.

The product-line income statement for the past 12 months follows:

All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year’s corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow:

Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given above, Mr. Andre provides you with the following data on product costs for Bubbs:

Required:

a. Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (and would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? (Round your answer to 2 decimal places.(i.e., 32.21))

b. How many cases of Bubbs does Luke have to sell in order to break even on the product? (Round variable cost percentage to 2 decimal places, fixed costs to whole dollar amount and profit per case to 3 decimal places for intermediate calculations. Round your final answer up to the nearest whole unit.)

c. Suppose Luke has a requirement that all products have to earn 5 percent of sales (before tax after corporate allocations) or they will be dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? (Round your minimum price per case to 2 decimal places and do not round your other intermediate calculations. Round your final answer up to the nearest whole unit.)

d. Assume all costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke’s profits increase or decrease? Assume that fixed production costs can be avoided if Bubbs is dropped. (Use variable cost percentage to 2 decimal places. Round intermediate calculations and final answers to nearest whole dollar amount.)

Case: Cost Structures for Global Shippers Inc.

Management from Global Shippers Inc, an international shipping business, is in the process of assessing the choice between two different cost structures for the business. Option A has relatively higher variable costs per unit shipped but lower annual fixed costs, while Option B has the opposite—relatively lower variable costs in its cost structure but higher fixed costs. Assume that delivery selling prices per unit are constant. The table below contains critical information in making the decision:

Management wants you to write a professional report, answering the following questions:

Questions

Case: Cost Structures for Global Shippers Inc.

Management from Global Shippers Inc, an international shipping business, is in the process of assessing the choice between two different cost structures for the business. Option A has relatively higher variable costs per unit shipped but lower annual fixed costs, while Option B has the opposite—relatively lower variable costs in its cost structure but higher fixed costs. Assume that delivery selling prices per unit are constant. The table below contains critical information in making the decision:

Management wants you to write a professional report, answering the following questions:

Questions

1) What is the break-even point, in terms of volume (i.e., number of shipments per year), for Option A? Option B?

(2) How many shipments would have to be made under Option A to produce operating income of $30,000 for an annual period?

(3) How many shipments per year would have to be made under Option A to produce an operating margin equal to 9% of sales revenue?  

(4) How many shipments are required under Option B to produce net income of $180,000 per year, given a corporate tax rate of 40%?

(5) Assume that for the coming year total fixed costs are expected to increase by 15% for each of the two options. What is the new break-even point, in terms of number of shipments, for each option? By what percentage did the break-even point change for each case? How do these figures compare to the percentage increase in budgeted fixed costs?

(6) Assume an average income-tax rate of 20%. What volume (number of shipments) would be needed to generate net income of 5% of revenue for each option?  

(7) Which option do you think is the more profitable one for this business? Explain.

(8) Which option do you consider to be more risky to the business? Explain (calculate degree of operating leverage to help answer this question).

During 2020, the following items caused taxable income to be different than accounting income:

• For tax purposes, CCA was $172,800 in 2020. The year-end book value is $720,000 and the tax value is $691,200.
• In 2020 Killim Inc. paid $72,000 rent in advance for 2020 ($36,000) and 2021 ($36,000). The Canada Revenue Agency (CRA) allows the deduction of actual rent payments when they are paid. By December 31, 2020, Killim had a balance of $36,000 in Prepaid Rent.
• In 2020, dividends of $24,000 were received from a taxable Canadian corporation and included in accounting income. These dividends are not taxable.
• In 2020, a golf club membership of $7,200 was an expense in arriving at accounting income. This is not an allowable deduction for tax purposes.
• In 2020, Killim Inc. offered a warranty on goods sold. Warranty expenses for 2020 were $26,400 and warranty cash payments in 2020 were $9,600. The balance of the warranty liability on the statement of financial position is $16,800. The Canada Revenue Agency (CRA) allows the deduction of actual warranty costs when they are paid.

Required:

( a ) Calculate taxable income for 2020.

( b ) Calculate current income taxes payable for 2020.

( c ) Calculate the balance of any deferred income taxes asset and deferred income tax liability at December 31, 2020. Do this for each item and identify any balances as either a deferred tax asset or a deferred tax liability.

            (d ) Prepare the journal entry(s) to record current income taxes for 2020 and record an entry for of the deferred tax determined in part c.

During 2020, the following items caused taxable income to be different than accounting income:

• For tax purposes, CCA was $172,800 in 2020. The year-end book value is $720,000 and the tax value is $691,200.
• In 2020 Killim Inc. paid $72,000 rent in advance for 2020 ($36,000) and 2021 ($36,000). The Canada Revenue Agency (CRA) allows the deduction of actual rent payments when they are paid. By December 31, 2020, Killim had a balance of $36,000 in Prepaid Rent.
• In 2020, dividends of $24,000 were received from a taxable Canadian corporation and included in accounting income. These dividends are not taxable.
• In 2020, a golf club membership of $7,200 was an expense in arriving at accounting income. This is not an allowable deduction for tax purposes.
• In 2020, Killim Inc. offered a warranty on goods sold. Warranty expenses for 2020 were $26,400 and warranty cash payments in 2020 were $9,600. The balance of the warranty liability on the statement of financial position is $16,800. The Canada Revenue Agency (CRA) allows the deduction of actual warranty costs when they are paid.

Required:

( a ) Calculate taxable income for 2020.

( b ) Calculate current income taxes payable for 2020.

( c ) Calculate the balance of any deferred income taxes asset and deferred income tax liability at December 31, 2020. Do this for each item and identify any balances as either a deferred tax asset or a deferred tax liability.

            (d ) Prepare the journal entry(s) to record current income taxes for 2020 and record an entry for of the deferred tax determined in part c.

Thomas Drake is a small business owner, operating a manufacturing plant in Chicago, Illinois (as an S-Corp.) He has heard about a new tax break called Section 199A (deduction for qualified business income) wherein he may be entitled to a deduction of up to 20% of his qualified business income. If he can qualify for this deduction, it would result in significant tax savings for his business. Consequently, he contacts your accounting firm to find out exactly what this deduction entails, and how, or if, he can qualify.

Thomas provides the CPA firm with the following information regarding his 2018 estimated income from his business, Rebecca, his spouse's income, and asset and payroll information related to his company. (Thomas and Rebecca file "married filing jointly.")

Item Amount Net Income from Operations (S Corp) $175,000 Spouse's (Rebecca) Income (from unrelated business) $50,000 Corporate Payroll $150,000 Corporate Total Assets $1,500,000 Taxable Income from Form 1040 $160,000 (Total Tax for Drake's after allowable deductions unrelated to the business)

Your team will prepare a tax research memorandum detailing the statutory framework of this deduction, a thorough explanation of Section 199A and all the key definitions, a determination of whether Thomas qualifies for the deduction, a determination of the amount of this deduction, and what Thomas could do to maximize this deduction in the future. The memorandum must be supported by tax research using IRC code, tax cases if any, and other scholarly journals and references. Since some of this data is estimated, he is asking for a general analysis of his tax situation relative to this deduction.

Some specific issues which must be addressed are the following:

• What is qualified business income (QBI)? What is included and what is not?
• What is a qualified trade or business (SSTB)?
• Any limitations, income or otherwise on this deduction?
• What are some planning strategies for help Thomas maximize this deduction in future years?
• What is an estimate of the amount of the deduction for 2018, if any?

The memorandum should be 7 - 10 pages with references to the IRC code and other tax support. This memorandum will serve as the basis for the team PowerPoint presentation due in Week 8.

Performing tax research to find correct answers to a given tax situation, and composing memorandums summarizing these findings, are important parts of tax practice. As outlined in your text, there are several authoritative primary tax law sources. The first, the Internal Revenue Code, is the law enacted by Congress. The Treasury Department and the Internal Revenue Service publish a number of materials that interpret and provide decisions, pronouncing their interpretation and application of the Code, including treasury regulations, revenue rulings, and revenue procedures. Finally, courts are often asked to hear tax disputes between taxpayers and the United States, and these courts issue rulings that interpret and apply the tax law, creating additional tax authority in the process. These combined writings constitute primary tax law authority, and these are the authorities that tax practitioners rely upon when a client asks for their opinions regarding how a proposed or a completed transaction should be treated for tax purposes.