Bone Thugs-n-Harmony incurs the expenditures listed below for constructing its corporate headquarters. They took out a $250,000 loan at 8% for the construction. They also have 2 additional loans: 500,000 at 10%, 200,000 at 6%. All loans were outstanding as of 1/1/2019 and were still outstanding when construction was completed on 4/30/2020.

How much interest does Bone Thugs-n-Harmony capitalize in 2019?

In 2019, Special Corporation, a calendar year C corporation, has a $75,000 charitable contribution carryover from a gift made in 2014. Special Corporation is contemplating a gift of land to a qualified charity in either 2019 or 2020. Special Corporation purchased the land as an investment five years ago for $100,000 (current year value is $250,000). Before considering any charitable deduction, Special Corporation projects taxable income of $1 million for 2019 and $1.2 million for 2020. Should Special Corporation make the gift of land to charity in 2019 or 2020? Provide detailed calculations and support for your answer.

McKenzie purchased qualifying equipment for his business that cost $457,900 in 2019. The taxable income of the business for the year is $111,500 before consideration of any § 179 deductions.

If an amount is zero, enter "0".

a. Calculate McKenzie’s § 179 expense deduction for 2019 and any carryover to 2020.
§ 179 expense deduction for 2019: $ _________
§ 179 carryover to 2020: $ _________

b. How would your answer change if McKenzie decided to use additional first-year (bonus) depreciation on the equipment instead of using § 179 expensing? Hint: See Concept Summary 8.5.
§ 179 expense deduction for 2019: $ _________
§ 179 carryover to 2020: __________

Mikey and Sal, married taxpayers filing a joint return, paid state income tax of $12,000 and other itemized deductions of $15,000 in 2020. Because the total of their allowable itemized deductions exceeded the standard deduction, they elected to itemize deductions on their 2020 federal income tax return rather than to claim the standard deduction. In May 2021, Mikey and Sal receive a refund of $1,000 for overpaid state income taxes paid in 2020. Under the tax benefit rule, how much of the $1,000 refund must they include in their gross income for 2021?

Huffy Co., a lessee, records a finance lease of machinery on January 1, 2020. The five annual lease payments of $525,000 are made at the beginning of each year. The present value of the lease payments at 10% is $2,189,180. Huffy uses straight-line depreciation with no salvage value.    

1. Prepare an amortization table for the life of the lease. Round all amounts to the nearest dollar.

b. Prepare all of Huffy’s journal entries for 2020 and 2021 (10 points)

The following information is related to Tobey Corporation for 2020:
 Net Income: $2,500,000
 Common Stock Activities
1/1/20: 700,000 common shares outstanding
3/1/20: Purchased 60,000 treasury shares
7/1/20: 3-for-1 stock split
11/1/20: 120,000 new shares issued for cash
 8% Cumulative Preferred Stock
10,000 shares at $100 par
Required
a. Compute weighted average common shares outstanding (WACSO) for 2020.
b. Compute basic earnings per share for 2020. (Round to no fewer than four decimal places.)

1. A University has recorded the following freshmen enrollment of students in each Academic Year shown below.

Year                Enrollment

2015                     662

2016                     596

2017                     570

2018                     541

2019                     496

      a.   What is the forecast for 2020 using a three period moving average?

b. What is the forecast for 2020 using a weighted moving average, in which the weights are .6, .3, .1?

c. What is the forecast for 2020 using a linear trend?

Extra credit (10 points) – This part is not required. Use the mean absolute deviation (MAD) to determine which method is most accurate.

I’m a Lumberjack and I’m OK Co. (Lumberjack) has the following temporary tax differences:

1. Lumberjack collected rents of $100,000 total for 4 years at the beginning of 2019. For tax purposes, rent revenue is recognized when collected. For financial reporting purposes, the lease is classified as an operating lease and rent revenue is recognized on a straight-line basis over the lease term.

2. Lumberjack has equipment that cost $1,120,000 with an estimated useful life of 7 years. At the end of 2019, the accounting carrying value for the equipment was $480,000 and the tax basis was $349,888. During 2020, the MACRS rate for tax purposes is 8.93%; straight-line depreciation is used for financial reporting purposes.

3. Lumberjack has a defined benefit pension plan for its employees. The accrual basis is used for financial reporting purposes, whereas for tax purposes, deductions are allowed as the plan is funded. As of the end of 2019, pension expense for financial reporting has been $500,000 greater than tax deductions allowed for funding contributions. For 2020, the pension expense recorded for financial reporting purposes was $70,000 and the amount deducted for tax purposes was $30,000.

REQUIRED: Complete the following schedules for each temporary difference to compute current year and future taxable (deductible) amounts for 2020.

The following shows the unadjusted Trial Balance of Services as at 31 August 2020 is as follows:

The following adjustments have not been considered for the year ended 31 August 2020:

· Provision for doubtful debts is to be estimated at 4% of total Debtors.

· Accrued Salaries Expenses, RM5,000.

· Insurance paid in advance for the month has expired. RM36,000 insurance was paid in advance for twelve (12) months period starting 1st January 2020.

· Furniture was purchased on 1 January 2019. Depreciation on the Machinery is required to be recorded using the straight-line method. Assume a useful life of five years with a zero-salvage value.

· RM12,000 unearned revenue has been earned during the period.

· Interest Expense for the month of July and August has not been recorded yet.

Required:

1) Prepare the adjusting entries for the above adjustments. (Show workings)

2) Prepare Services Statement of Comprehensive Income (Income Statement) for the year ended 31 August 2020.                 

3) Prepare Services Statement of Financial Position as at 31 August 2020.

Determining Merchandise to be Included or Excluded from Ending Inventory

The unadjusted inventory balance of Sara Ann Corp. is $500,000 on December 31, 2020, based on a physical inventory count. The following items must be considered before the inventory valuation is finalized.

a. On December 31, the physical inventory excluded $500 of merchandise inventory shipped to Sara Ann Corp. from a vendor f.o.b. destination that arrived on January 1, 2021.

b. On December 31, the physical inventory included $18,000 of merchandise inventory held on consignment by a customer. Sara Ann Corp. is the consignor.

c. On December 31, the physical inventory included $800 of merchandise held on consignment. The consignor is Sara Ann’s largest vendor.

d. $18,000 of in-transit merchandise was shipped f.o.b. shipping point to a customer and was excluded from the physical inventory count. The merchandise was shipped on December 28, 2020, and is expected to arrive at the customer on December 31, 2020.

e. Goods are in-transit from a vendor to Sara Ann on December 31, 2020. The invoice cost was $12,000 and the goods were shipped f.o.b. shipping point on December 28, 2020. The merchandise was excluded from the physical inventory count because they had not been delivered.

f. Merchandise with a cost of $300 is held in the receiving department for return. The merchandise was excluded from the physical inventory count.

Required

Considering items a through f, determine the adjusted inventory balance for Sara Ann Corp.

Adjusted inventory balance on December 31, 2020: $Answer