On January 1, 2018, General Bell Company issued $1,200,000 par value, 8%, five-year bonds while the effective rate is 12%. The bonds are dated January 1, 2018. The interests are payable semiannually each June 30 and December 31. On January 1, 2020, General Bell calls half the issue at 101 and cancels it. Write all necessary journal entries.

Alice is single and self-employed in 2018. Her net business profit on her Schedule C for the year is $170,000.

What is her self-employment tax liability and additional Medicare tax liability for 2018? (Round your intermediate calculations to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

Self-employment tax liability-

Additional medicare tax liability-

Alice is single and self-employed in 2018. Her net business profit on her Schedule C for the year is $190,000.

What is her self-employment tax liability and additional Medicare tax liability for 2018? (Round your intermediate calculations to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

Self-employment tax liability

Additional medicare tax liability

Drs. Glenn Feltham and David Ambrose began operations of their physical therapy clinic, called Northland Physical Therapy, on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, was as follows (the amounts are rounded to thousands of dollars to simplify):

Transactions during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $14 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $17 cash on July 2, 2018.
3. Issued additional shares of common stock for $5 on July 3.
4. Purchased software on July 4, $3 cash.
5. Purchased supplies on July 5 on account for future use, $7.
6. Recorded revenues on December 6 of $47, including $8 on credit and $39 received in cash.
7. Recognized salaries and wages expense on December 7 of $22; paid in cash.
8. Collected accounts receivable on December 8, $9.
9. Paid accounts payable on December 9, $10.
10. Received a $3 cash deposit on December 10 from a hospital for a contract to start January 5, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $2.
12. Supplies of $3 were counted on December 31, 2018.
13. Depreciation for 2018, $4.
14. Accrued interest of $1 on notes payable.
15. Salaries and wages incurred but not yet paid or recorded, $4.
16. Income tax expense for 2018 was $4 and will be paid in 2019.

>>> 1, 3, 5 and 8. Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions (a)-(j), adjusting entries (k)-(p), and closing entry. (Enter your answers in thousands of dollars.)

>>> Post the journal entries from requirement above to T-accounts and prepare an unadjusted trial balance. (Enter your answers in thousands of dollars.)

Note: This problem is for the 2018 tax year. Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2016. Alfred and Beulah will file a joint return for 2018. Alfred's Social Security number is 111-11-1112. Beulah's Social Security number is 123-45-6789, and she adopted "Old" as her married name. They live at 211 Brickstone Drive, Atlanta, GA 30304. Alfred was divorced from Sarah Old in March 2016. Under the divorce agreement, Alfred is to pay Sarah $1,250 per month for the next 10 years or until Sarah's death, whichever occurs first. Alfred pays Sarah $15,000 in 2018. In addition, in January 2018, Alfred pays Sarah $50,000, which is designated as being for her share of the marital property. Also, Alfred is responsible for all prior years' income taxes. Sarah's Social Security number is 123-45-6788. Alfred's salary for 2018 is $150,000, and his employer, Cherry, Inc. (Federal I.D. No. 98-7654321), provides him with group term life insurance equal to twice his annual salary. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes. The proper amounts were withheld for FICA taxes. Beulah recently graduated from law school and is employed by Legal Aid Society, Inc. (Federal I.D. No. 11-1111111), as a public defender. She receives a salary of $42,000 in 2018. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The proper amounts were withheld for FICA taxes. Beulah has $500 in qualified dividends on Yellow Corporation stock she inherited. Alfred and Beulah receive a $1,900 refund on their 2017 state income taxes. They itemized deductions on their 2017 Federal income tax return (total of $15,000). Alfred and Beulah pay $4,500 interest and $1,450 property taxes on their personal residence in 2018. Their charitable contributions total $2,400 (all to their church). They paid sales taxes of $1,400, for which they maintain the receipts. Both spouses had health insurance for all months of 2018 and do not want to contribute to the Presidential Election Campaign. Provide the following that would be reported on Alfred and Beulah's Schedule A: 1. Calculate the deduction allowed for medical and dental expenses. $ 2. Calculate the deduction for taxes. $ 3. Calculate the deduction for interest. $ 4. Calculate the charitable deduction allowed. $ 5. Calculate total itemized deductions:

Unit 2 Exercise Questions

Q1. Show detailed calculations of CFFA under two approaches we have discussed in our class.

Q2. Comment on the cashflow performance of the company in the years of 2018 and 2019.(20 marks)

Q3. If you were to advise Flamingo Inc. for the year 2020, what recommendations would you propose regarding the capital structure of the company? Why?

Unit 2 Exercise Questions

Q1. Show detailed calculations of CFFA under two approaches we have discussed in our class.

Q2. Comment on the cashflow performance of the company in the years of 2018 and 2019.(20 marks)

Q3. If you were to advise Flamingo Inc. for the year 2020, what recommendations would you propose regarding the capital structure of the company? Why?

The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2018 and 2017:

On October 15, 2018, Jackson entered into a tentative agreement to sell the assets of one of its divisions. The division qualifies as a component of an entity as defined by GAAP. The division was sold on December 31, 2018, for $5,540,000. Book value of the division’s assets was $4,760,000. The division’s contribution to Jackson’s operating income before-tax for each year was as follows:

Assume an income tax rate of 40%.

Required: (In each case, net any gain or loss on sale of division with annual income or loss from the division and show the tax effect on a separate line)
1. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
2. Assume that by December 31, 2018, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $5,540,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
3. Assume that by December 31, 2018, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $4,080,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.

Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

Drs. Glenn Feltham and David Ambrose began operations of their physical therapy clinic, called Northland Physical Therapy, on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, was as follows (the amounts are rounded to thousands of dollars to simplify):

Transactions during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $28 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $31 cash on July 2, 2018.
3. Issued additional shares of common stock for $5 on July 3.
4. Purchased software on July 4, $3 cash.
5. Purchased supplies on July 5 on account for future use, $7.
6. Recorded revenues on December 6 of $61, including $8 on credit and $53 received in cash.
7. Recognized salaries and wages expense on December 7 of $36; paid in cash.
8. Collected accounts receivable on December 8, $9.
9. Paid accounts payable on December 9, $10.
10. Received a $3 cash deposit on December 10 from a hospital for a contract to start January 5, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $2.
12. Supplies of $3 were counted on December 31, 2018.
13. Depreciation for 2018, $4.
14. Accrued interest of $1 on notes payable.
15. Salaries and wages incurred but not yet paid or recorded, $3.
16. Income tax expense for 2018 was $4 and will be paid in 2019.

- Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions (a)-(j), adjusting entries (k)-(p), and closing entry. (Enter your answers in thousands of dollars.)

- Prepare the closing journal entry. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)

On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $504,000. Birch reported a $510,000 book value and the fair value of the noncontrolling interest was $126,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $160,000 when Cedar had a $164,000 book value and the 20 percent noncontrolling interest was valued at $40,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life.

These companies report the following financial information. Investment income figures are not included.   

Assume that each of the following questions is independent:

A.If all companies use the equity method for internal reporting purposes, what is the December 31, 2017, balance in Aspen's Investment in Birch Company account?

B.What is the consolidated net income for this business combination for 2018?

C.What is the net income attributable to the noncontrolling interest in 2018?

D.Assume that Birch made intra-entity inventory transfers to Aspen that have resulted in the following intra-entity gross profits in inventory at the end of each year:

What is the accrual-based net income of Birch in 2017 and 2018, respectively?