Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (amounts are rounded to thousands of dollars to simplify).

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

1. Borrowed $16 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $23 cash on July 2.
3. Issued additional shares of common stock on July 3 for $5.
4. Purchased additional equipment on August 4, $3 cash.
5. Purchased, on account, supplies on September 5 for future use, $10.
6. On December 6, recorded revenues in the amount of $60, including $9 on credit and $51 received in cash.
7. Paid salaries and wages expenses on December 7, $24.
8. Collected accounts receivable on December 8, $8.
9. Paid accounts payable on December 9, $11.
10. Received a $4 deposit on December 10 for work to start January 15, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $4.
12. Supplies of $4 were counted on December 31, 2018.
13. Depreciation for 2018, $2.
14. Accrued interest on notes payable of $5.
15. Wages earned but not yet paid, $3.
16. Income tax for 2018 was $4 and will be paid in 2019.

C4-4 Part 6

1. 6-a. Prepare an income statement.

2. 6-b. Prepare statement of retained earnings.

3. 6-c. Prepare a balance sheet.

(For all requirements, enter your answers in thousands of dollars.)

Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (amounts are rounded to thousands of dollars to simplify).

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

1. Borrowed $16 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $23 cash on July 2.
3. Issued additional shares of common stock on July 3 for $5.
4. Purchased additional equipment on August 4, $3 cash.
5. Purchased, on account, supplies on September 5 for future use, $10.
6. On December 6, recorded revenues in the amount of $60, including $9 on credit and $51 received in cash.
7. Paid salaries and wages expenses on December 7, $24.
8. Collected accounts receivable on December 8, $8.
9. Paid accounts payable on December 9, $11.
10. Received a $4 deposit on December 10 for work to start January 15, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $4.
12. Supplies of $4 were counted on December 31, 2018.
13. Depreciation for 2018, $2.
14. Accrued interest on notes payable of $5.
15. Wages earned but not yet paid, $3.
16. Income tax for 2018 was $4 and will be paid in 2019.

7. 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.)

NOTE: THIS IS ALL INFORMATION PROVIDED

Eric Mendes and Becky Conners, each age 42, married on September 7, 2016. Eric and Becky will file a joint return for 2018. Eric’s Social Security number is 444-55-6667. Becky’s Social Security number is 321-21-4321. Becky adopted Mendes as her married name. They live at 4450 Emerald Street, Los Angeles, California 90032.

Eric divorced his former wife, Sara Mendes, in March of 2016. Under the divorce agreement Eric pays Sara $1,250 per month for the next 10 years or until Sara’s death, whichever comes first. During 2018, Eric made all twelve payments to her. In addition, Eric paid Sara $22,000 which is designated as being for her share of the marital property. Eric and Sara had no children. Sara’s Social Security number is 677-76-9292.

Eric’s 2018 salary is $150,000. He is an executive working for Maple Manufacturing Company. As part of his compensation package, Maple provides him with group term life insurance equal to twice his annual salary. His employer withheld $25,000 for federal income taxes and $8,500 for California income taxes.

Becky recently graduated from law school and is employed by the law firm of Davis and Davis. She received a salary of $85,000 in 2018. Her employer withheld $9,000 for federal income taxes and $4,000 for California income taxes.

Eric and Becky had $550 of interest income from Bank of America. They received a $1,900 refund on their 2017 California income tax return during the year. They itemized deductions during 2017 (itemized deductions exceeded their standard deduction by $600). During 2018 they paid $7,200 of mortgage interest and $8,000 of property taxes on their personal residence. They made charitable cash contributions of $1,800 to their church during 2018. Both spouses had health insurance the entire year and do not want to contribute to the Presidential Election Campaign.

Prepare Eric and Becky’s 2018 federal income tax return. Part of your assignment is to select the forms necessary to prepare this income tax return. Forms are available at IRS.gov

Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $510,000 cash. Immediately after the acquisition, the two companies have the following account balances. Clay’s equipment (with a five-year remaining life) is actually worth $440,000. Credit balances are indicated by parentheses. Adams Clay Current assets $ 300,000 $ 220,000 Investment in Clay 510,000 0 Equipment 600,000 390,000 Liabilities (200,000) (160,000) Common stock (350,000) (150,000) Retained earnings, 1/1/17 (860,000) (300,000) In 2017, Clay earns a net income of $55,000 and declares and pays a $5,000 cash dividend. In 2017, Adams reports net income from its own operations (exclusive of any income from Clay) of $125,000 and declares no dividends. At the end of 2018, selected account balances for the two companies are as follows: Adams Clay Revenues $ (400,000 ) $ (240,000 ) Expenses 290,000 180,000 Investment income Not given 0 Retained earnings, 1/1/18 Not given (350,000 ) Dividends declared 0 8,000 Common stock (350,000 ) (150,000 ) Current assets 580,000 262,000 Investment in Clay Not given 0 Equipment 520,000 420,000 Liabilities (152,000 ) (130,000 ) What are the December 31, 2018, Investment Income and Investment in Clay account balances assuming Adams uses the: Equity method. Initial value method. How does the parent’s internal investment accounting method choice affect the amount reported for expenses in its December 31, 2018, consolidated income statement? How does the parent’s internal investment accounting method choice affect the amount reported for equipment in its December 31, 2018, consolidated balance sheet? What is Adams’s January 1, 2018, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the: Equity value method. Initial value method. What worksheet adjustment to Adams’s January 1, 2018, Retained Earnings account balance is required if Adams accounts for its investment in Clay using the initial value method? Prepare the worksheet entry to eliminate Clay’s stockholders’ equity. What is consolidated net income for 2018?

Q3. Jamil Berhad prepares financial statements for the year ended 31 December 2018. The financial statements are expected to be authorised for issue on 20 April 2019. The following events have taken place:

(i) A health and safety investigation of an incident which occurred in 2018 was concluded in February 2019, resulting in RM2.5 million fine for Jamil Berhad. A provision for RM0.5 million had been recognised in Jamil Berhad’s financial statements for the year ended 31 December 2018.

(ii) Jamil Berhad’s professional fees for the year ended 31 December 2018 are still under negotiation. Jamil Berhad paid RM15,000 for audit fees and RM1,200 for secretarial fees in the preceding years.

(iii) During the year 2018, the company unintentionally released poisonous gases into the atmosphere which resulted in serious complaints from local residents. Some have claimed become very ill. A law firm representing the affected residents has submitted a compensation claim to Jamil for pain and suffering of between RM100,000 to RM500,000 for each affected resident. There were in total of 16 residents reported being affected by this poisonous gas. The court hearing is scheduled on May 2019. The company does not believe that they will be required to make any payments to claimants, as this was an accident and noone has been seriously harmed as a result.

(iv) The accountant notes that an electricity invoice for the last six months' usage has not been received.

(v) Inventory reported on the statement of financial position includes goods costing RM30,000 that were shop soiled and could only be sold for RM21,000 after reconditioning them at a cost of RM3,000. This was detected on 31 December 2018.

(vi) An outstanding court case at 31 December 2018 relating to faulty goods supplied by Jamil Berhad. Legal advice states that there is a small chance that they will have to pay out RM4 million, but the most likely outcome is believed to be a payout of RM6 million. Either way, Jamil Berhad will have to pay legal fees amounting RM0.1 million. Jamil Berhad believes the fault lies with the supplier, and is pursuing a counter-claim. Legal advice states that it is possible, but not likely, that this action will succeed. Required: Explain the most correct approach of accounting treatments for all the above. Your answer shall make reference to relevant MFRS Standards.

1/ On January 1, 2018, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $100,300. The ending inventory, valued at year-end costs, and the relative cost index for each of the next three years is below:

In determining the inventory balance should Badger report in its 12/31/2019 balance sheet:

Multiple Choice

• An additional layer of $23,330 is added to the 1/1/2019 balance.

• An additional layer of $22,330 is added to the 1/1/2019 balance.

• An additional layer of $11,330 is added to the 1/1/2019 balance.

• None of these answer choices are correct.

2/ Northwest Fur Co. started 2018 with $104,000 of merchandise inventory on hand. During 2018, $590,000 in merchandise was purchased on account with credit terms of 3/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,900. Merchandise with an invoice amount of $3,300 was returned for credit. Cost of goods sold for the year was $372,000. Northwest uses a perpetual inventory system.

Assuming Northwest uses the gross method to record purchases, what is the cost of goods available for sale?

Multiple Choice

• $680,999.

• $680,900.

• $703,800.

• $698,600

3/ Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

• 42 units at $97
• 72 units at $76
• 171 units at $53

Sales for the year totaled 269 units, leaving 16 units on hand at the end of the year.

Ending inventory using the LIFO method is:

Multiple Choice

• $1,552.

• $898.

• $1,045.

• $848.

4/ Linguini Inc. adopted dollar-value LIFO (DVL) as of January 1, 2018, when it had an inventory of $862,000. Its inventory as of December 31, 2018, was $897,000 at year-end costs and the cost index was 1.15. What was DVL inventory on December 31, 2018?

Multiple Choice

• 780,000.

• 862,000.

• 897,000.

• 991,300.

The net changes in the balance sheet accounts of Eusey, Inc. for the year 2018 are shown below:

Prepare a statement of cash flows (indirect method). Ignore tax effects. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Blue Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2017, and May 31, 2018. The income from operations for the fiscal year ended May 31, 2017, was $1,791,000 and income from continuing operations for the fiscal year ended May 31, 2018, was $2,378,000. In both years, the company incurred a 10% interest expense on $2,345,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $594,000 on February 2018. The company uses a 40% effective tax rate for income taxes. The capital structure of Blue Corporation on June 1, 2016, consisted of 973,000 shares of common stock outstanding and 19,800 shares of $50 par value, 6%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants. On October 1, 2016, Blue sold an additional 494,000 shares of the common stock at $20 per share. Blue distributed a 20% stock dividend on the common shares outstanding on January 1, 2017. On December 1, 2017, Blue was able to sell an additional 805,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years. Identify whether the capital structure at Blue Corporation is a simple or complex capital structure. Determine the weighted-average number of shares that Blue Corporation would use in calculating earnings per share for the fiscal year ended: Weighted-average number of shares (1) May 31, 2017 (2) May 31, 2018 Prepare, in good form, a comparative income statement, beginning with income from operations, for Blue Corporation for the fiscal years ended May 31, 2017, and May 31, 2018. This statement will be included in Blue’s annual report and should display the appropriate earnings per share presentations. (Round earnings per share to 2 decimal places, e.g. $1.55.) BLUE CORPORATION Comparative Income Statement For Fiscal Years Ended May 31, 2017 and 2018 2017 2018 $ $ $ $ Earnings per share: $ $ $ $

Problem 10-5A Computing and revising depreciation; selling plant assets LO C2, P1, P2

Yoshi Company completed the following transactions and events involving its delivery trucks.

2016

2017

2018

Required:

1-a. Calculate depreciation for year 2017.
1-b. Calculate book value and gain (loss) for sale of Truck on December, 2018.
1-c. Prepare journal entries to record these transactions and events.

Required 1A

Required 1B

Required 1C

Calculate depreciation for year 2017.

Required 1B

Required 1C

Calculate book value and gain (loss) for sale of Truck on December, 2018.

Journal entry worksheet

Record the year-end adjusting entry for the depreciation expense of the delivery truck.

Journal entry worksheet

Record the year-end adjusting entry for the depreciation expense of the delivery truck.

Journal entry worksheet

Record the sale of the delivery truck for $5,500 cash.