Eric’s Excavations has a financial year which ends on the 30th June. Eric purchased a truck for $200,000 on 1 July 2019, and estimates that the asset will have a residual value of $50,000 and a useful life of 5 years. The truck was sold on 31 December 2020 for $160,000. Required: Calculate the annual depreciation on the truck for the year ended 30th June 2020 and prepare the adjusting journal entry for depreciation . Show an excerpt from the Balance Sheet as at 30^th June 2020 of the Non-current assets .

Prepare the journal entries to account for depreciation for the year ended 30 June 2021, calculate the gain/(loss) on sale of truck and make the journal entries to dispose of the truck .

Calculations of gain/(loss)

During January 2019, Mindy, Inc. acquired 30% of the outstanding common stock of Milton Co. for $1,500,000. This investment gave Mindy the ability to exercise significant influence over Milton. Milton’s assets on that date were recorded at $6,400,000 with liabilities of $3,000,000. Any excess of cost over book value of Mindy’ investment was attributed to unrecorded patents having a remaining useful life of ten years.

In 2019, Milton reported net income of $600,000. For 2020, Milton reported net income of $750,000. Dividends of $200,000 were paid in each of these two years. What was the reported balance of Mindy’ Investment in Wilson Co. at December 31, 2020 and how much was the reported investment income in Wilson for 2020?

On August 1, 2020, Groton Corporation borrowed $3 million and issued a nine-month note. Interest was discounted at issuance at a 4% discount rate. Prepare the journal entries to record the issuance of the noninterest-bearing note and all subsequent events related to the note through April 30, 2021. What would be the annual effective interest rate?

Required;

MULTIPLE CHOICE (from a to c) WITH THE INFORMATION SHOWN ABOVE

A. Has your currency appreciated or depreciated against the dollar between March 10 and May 9, 2020? Choose from the answers above:

a. It has depreciated
b. It has stayed the same, has not changed in value
c. I have no idea
d. Other:

B. The Mushroom Kingdom currency, called Coin, has appreciated against the dollar in this period. Based on this information and your answer to the previous question, what should have happened with your currency regarding the Mushroom Kingdom Coin? Choose from the answers above:

a. Your currency must necessarily have appreciated against the Mushroom Kingdom Coin
b. Your currency must necessarily have depreciated against the Mushroom Kingdom Coin
c. We do not have enough information, it may have been appreciated, but it may also have depreciated
d. Other:

C. If interest rates in the United States rise and all other factors (inflation, interest rates in other countries, etc.) remain the same, will your currency appreciate or depreciate against the dollar? Choose from the answers above:

a. Will be appreciated
b. Will depreciate
c. Other:

D. Explain your answer to the previous question

E. Blue wants to expand its exports and since March 10 has been negotiating with beverage distributors in the country that has your currency. Is the evolution observed in the exchange rate in the last two months convenient or detrimental to Serrallés? (Note that his objective is to sell as many bottles as possible and that he always sells in dollars, he does not accept payments in another currency). Explain your answer

F. Imagine that tomorrow they will reach an agreement. However, in Blue they have a concern: they have never worked with this client, and sending the bottles before receiving payment is risky, but the client does not want to pay until they receive the order and verify that it is OK. What can they do?

You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following:

1)Pretax accounting income was $62 million and taxable income was $10 million for the year ended December 31, 2018.

2)The difference was due to three items:

A)Tax depreciation exceeds book depreciation by $50 million in 2018 for the business complex acquired that year. This amount is scheduled to be $80 million in 2019 and to reverse as ($80 million) and ($50 million) in 2020, and 2021, respectively.

B)Insurance of $10 million was paid in 2018 for 2019 coverage.

C)A $8 million loss contingency was accrued in 2018, to be paid in 2020.

3)No temporary differences existed at the beginning of 2018.

4)The tax rate is 40%.

Required:
1. Determine the amounts necessary to record income taxes for 2018 and prepare the appropriate journal entry.
2. Assume the enacted federal income tax law specifies that the tax rate will change from 40% to 35% in 2020. When scheduling the reversal of the depreciation difference, you were uncertain as to how to deal with the fact that the difference will continue to originate in 2019 before reversing the next two years. Upon consulting PricewaterhouseCoopers' Comperio database, you found:

.441 Depreciable and amortizable assets
Only the reversals of the temporary difference at the balance sheet date would be scheduled. Future originations are not considered in determining the reversal pattern of temporary differences for depreciable assets. FAS 109 [FASB ASC 740–Income Taxes] is silent as to how the balance sheet date temporary differences are deemed to reverse, but the FIFO pattern is intended.

You interpret that to mean that, when future taxable amounts are being scheduled, and a portion of a temporary difference has yet to originate, only the reversals of the temporary difference at the balance sheet date can be scheduled and multiplied by the tax rate that will be in effect when the difference reverses. Future originations (like the depreciation difference the second year) are not considered when determining the timing of the reversal. For the existing temporary difference, it is assumed that the difference will reverse the first year the difference begins reversing.

Determine the amounts necessary to record income taxes for 2018 and prepare the appropriate journal entry.

You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following:

Pretax accounting income was $75 million and taxable income was $13 million for the year ended December 31, 2018.

The difference was due to three items:

Tax depreciation exceeds book depreciation by $60 million in 2018 for the business complex acquired that year. This amount is scheduled to be $70 million in 2019 and to reverse as ($70 million) and ($60 million) in 2020, and 2021, respectively.

Insurance of $10 million was paid in 2018 for 2019 coverage.

A $8 million loss contingency was accrued in 2018, to be paid in 2020.

No temporary differences existed at the beginning of 2018.

The tax rate is 40%.

Required:
1. Determine the amounts necessary to record income taxes for 2018 and prepare the appropriate journal entry.
2. Assume the enacted federal income tax law specifies that the tax rate will change from 40% to 35% in 2020. When scheduling the reversal of the depreciation difference, you were uncertain as to how to deal with the fact that the difference will continue to originate in 2019 before reversing the next two years. Upon consulting PricewaterhouseCoopers' Comperio database, you found:

.441 Depreciable and amortizable assets
Only the reversals of the temporary difference at the balance sheet date would be scheduled. Future originations are not considered in determining the reversal pattern of temporary differences for depreciable assets. FAS 109 [FASB ASC 740–Income Taxes] is silent as to how the balance sheet date temporary differences are deemed to reverse, but the FIFO pattern is intended.

You interpret that to mean that, when future taxable amounts are being scheduled, and a portion of a temporary difference has yet to originate, only the reversals of the temporary difference at the balance sheet date can be scheduled and multiplied by the tax rate that will be in effect when the difference reverses. Future originations (like the depreciation difference the second year) are not considered when determining the timing of the reversal. For the existing temporary difference, it is assumed that the difference will reverse the first year the difference begins reversing.

Determine the amounts necessary to record income taxes for 2018 and prepare the appropriate journal entry.

You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following:

Pretax accounting income was $64 million and taxable income was $11 million for the year ended December 31, 2018.

The difference was due to three items:

Tax depreciation exceeds book depreciation by $50 million in 2018 for the business complex acquired that year. This amount is scheduled to be $70 million in 2019 and to reverse as ($60 million) and ($60 million) in 2020, and 2021, respectively.

Insurance of $9 million was paid in 2018 for 2019 coverage.

A $6 million loss contingency was accrued in 2018, to be paid in 2020.

No temporary differences existed at the beginning of 2018.

The tax rate is 40%.

Required:
1. Determine the amounts necessary to record income taxes for 2018 and prepare the appropriate journal entry.
2. Assume the enacted federal income tax law specifies that the tax rate will change from 40% to 35% in 2020. When scheduling the reversal of the depreciation difference, you were uncertain as to how to deal with the fact that the difference will continue to originate in 2019 before reversing the next two years. Upon consulting PricewaterhouseCoopers' Comperio database, you found:

.441 Depreciable and amortizable assets
Only the reversals of the temporary difference at the balance sheet date would be scheduled. Future originations are not considered in determining the reversal pattern of temporary differences for depreciable assets. FAS 109 [FASB ASC 740–Income Taxes] is silent as to how the balance sheet date temporary differences are deemed to reverse, but the FIFO pattern is intended.

You interpret that to mean that, when future taxable amounts are being scheduled, and a portion of a temporary difference has yet to originate, only the reversals of the temporary difference at the balance sheet date can be scheduled and multiplied by the tax rate that will be in effect when the difference reverses. Future originations (like the depreciation difference the second year) are not considered when determining the timing of the reversal. For the existing temporary difference, it is assumed that the difference will reverse the first year the difference begins reversing.

Determine the amounts necessary to record income taxes for 2018 and prepare the appropriate journal entry.

National Savings as it stands today is one of the primeval institutions in the country with a legacy of more than 140 years. It has the powers to formulate policies and execute various National Savings Schemes (NSS). So far, it has not only remained successful in promoting financial savings in the economy but has also generated requisite funds for the Government to finance the budgetary deficit and infrastructure projects. As a custodian of the nation’s savings, today the National Savings is the largest investment and financial institution in Pakistan with a portfolio of over Rs. 3.4 trillion and more than 7 million valued investors are being served through a large network of 376 branches nationwide controlled by 12 Regional Directorates of National Savings (RDNS) and 4 Zones. Following is the information of two national saving products:

Regular Income Certificates (RICs)
Keeping in view the monthly requirements of the general public, the Regular Income Certificates (RICs) with a maturity period of five years were launched on February 2, 1993. RICs are available in the denominations (par values) of: 50,000/-, Rs. 100,000/-, Rs. 500,000/-, Rs. 1,000,000/-, Rs.5,000,000/-, Rs.10,000,000/. Profit is paid on monthly basis started from the date of issue of certificates. RIC can be encashed any time after issuance by the investor subject to the deduction of service charges. If enchased before completion of 1, 2, 3 and 4 years from the date of issue: then 2 %,1.50%, 1%, and 0.50% service charges of the face value shall be deducted. There will no service charges after the completion of 4 years. Historical Rates Remained Applicable on Regular Income Certificates:
From To Coupon Rate (% per year)
01-Jan-19 30-June-19 12.00%
01-July-19 31-Oct-19 12.96%
01-Nov-19 31-Dec-19 10.92%
01-Jan-20 23-Apr-20 10.56%
24-Apr-20 Till Date 8.28%

Special Savings Certificates (SSCs)
SSCs with a (maturity period of three years) was launched on February 4, 1990 that offers a unique investment opportunity for small and medium savers to meet their periodic financial needs. SSCs are available in the denomination of 500/-, Rs.1000/-, Rs. 5,000/-, Rs. 10,000/-, Rs. 50,000/-, Rs. 100,000/-, Rs. 500,000/-, Rs. 1,000,000/- Profit is payable on the completion of each period of six months. SSCs is encashable by the investor at par any time after the date of purchase. However, no profit is payable if the encashment is made before completion of six months and no service charges shall be deducted for the encashment of these certificates. Historical Rates Remained Applicable on Special Saving Certificates:
From To Coupon Rate (% per year)
01-Jan-19 30-June-19 11.40%
01-July-19 31-Oct-19 12.70%
01-Nov-19 23-Apr-20 11.00%
24-Apr-20 Till Date 8.60%

The bonds can be purchased by depositing cash at the Issuing Office or by presenting a cheque/ draft/ pay-order. The Certificate shall be issued immediately against the cash payment. However, in case of deposit through cheque/ draft/ pay-order, the Certificate shall be issued with effect from the date of realization of the cheque/ draft/ pay-order after receiving the clearance advice.

1. Assuming that you are have 200,000 to invest and you will invest 50% in RIC and 50% in SSC and you plan to purchase only two bonds, which par value bonds will you purchase? (1 mark)

2. You purchased the bonds on 1st April 2019 and the bonds are issued at par value, calculate the yield to maturity (YTM) of both bonds? (hint: the bond’s market price is the par value)

3. Calculate the bond values 1 year after the issue on 1st April 2020, assuming that YTM is not constant and all new bonds are being issued at par.

4. Justify the bond values calculated in the previous part?

5. If the investor decided to encash both bonds after completion of the second year. What will be their cash flows?

6. Evaluate the relevance of the three types of risk for both bonds.

IMT Co. reported the following selected information for 2010:

Sales revenue ..........................................................................................    $865,000

Cost of goods sold..................................................................................      360,000

Depreciation expense .............................................................................        43,000

Salaries & wages expense ……………………………………………...     178,000

Rent Expense …………………………………………………………..       95,000

                                                                                          Beginning of Year        End of Year

Accounts receivable .....................................                $ 15,000                 $ 35,000

Prepaid rent ...................................................                   21,000                    15,000

Salaries & wages payable .............................                   33,000                    18,000

Required:Use the above information to calculate:

The cash collected from customers

ii)The cash paid for depreciation

iii)The cash paid to employees

iv)The cash paid for rent

Consider a portion of monthly return data (In %) on 20-year Treasury Bonds from 2006–2010.

Estimate a linear trend model with seasonal dummy variables to make forecasts for the first three months of 2011. (Round intermediate calculations to at least 4 decimal places and final answers to 2 decimal places.)