Carla Vista Corp. agreed to lease property from Sunland Corp. effective January 1, 2020, for an annual payment of $25,592, beginning January 1, 2020. The property is made up of land with a fair value of $104,000 and a two-storey office building with a fair value of $170,000 and a useful life of 25 years with no residual value. The implicit interest rate is 9%, the lease term is 25 years, and title to the property is transferred to Carla Vista at the end of the lease term. Prepare the required entries made by Carla Vista Corp. on January 1, 2020, and at its year end of December 31, 2020. Both Carla Vista and Sunland use ASPE.

(Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

The cost of equipment purchased by Bramble, Inc., on June 1, 2020, is $92,400. It is estimated that the machine will have a $8,400 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000, and its total production is estimated at 600,000 units. During 2020, the machine was operated 6,900 hours and produced 63,200 units. During 2021, the machine was operated 6,320 hours and produced 55,200 units.

Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021, using the following methods. (Round depreciation per unit to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 45,892.)

On January 1, 2020, Patriot Inc. acquires 100% of SoreLoser Corp.'s outstanding common stock by exchanging 80,000 shares of Patriot's $10 par value common voting stock. On January 1, 2020, Patriot's voting common stock had a market value of $60.00 per share. SoreLoser's balances on the acquisition date, just prior to acquisition are listed below. SORELOSER IS BEING DISSOLVED.

                                                                            BOOK             FAIR MARKET

                                                                            VALUE                  VALUE

CASH $ 125,000                 $ 125,000

ACCOUNTS RECEIVABLE 275,000                    275,000

INVENTORY 330,000                    360,000

LAND 400,000                    460,000

BUILDING (NET) 1,250,000                1,500,000  

EQUIPMENT (NET) 1,620,000                1,475,000

ACCOUNTS PAYABLE (250,000)                (250,000)

COMMON STOCK, $1 PAR (1,000,000)             

ADDITIONAL PAID IN CAPITAL(1,500,000)

RETAINED EARNINGS, 1/1/2020(1,250,000)                 

Required:
Compute the value of the Goodwill account on the date of acquisition, 1/1/2020.

RECORD THE JOURNAL ENTRY FOR THE ACQUISITION OF INVESTMENT ON PATRIOT'S BOOKS

The cost of equipment purchased by Blossom, Inc., on June 1, 2020, is $105,000. It is estimated that the machine will have a $4,200 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 50,400, and its total production is estimated at 504,000 units. During 2020, the machine was operated 7,440 hours and produced 68,200 units. During 2021, the machine was operated 6,820 hours and produced 59,520 units.

Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021, using the following methods. (Round depreciation per unit to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 45,892.)

2020
2021
(a)       Straight-line      
$
$
(b)       Units-of-output      
$
$
(c)       Working hours      
$
$
(d)       Sum-of-the-years'-digits      
$
$
(e)       Double-declining-balance (twice the straight-line rate)      
$
$

1. Consider the purchase of a new farm truck (automobile). The specific information is:

Total Purchase cost = $150,000.00              Purchase date = Jan 1, 2020

Useful life = 6 years                                      Salvage value = $50,000.00

Note: each highlighted box is worth 1 point

Complete each depreciation table.

ECONOMIC DEPRECIATION:

1. Fill in the table using the straight-line depreciation method for economic depreciation. (5 points)

1. Fill in the table using the straight-line method for economic depreciation as if the purchase date was October 1, 2020 (partial year method) (7 points)

On June 1, 2020, Krypton Industries [KI] purchased a call option for $ 2,400, giving it the right to buy 2,000 shares of Kriminel Corporation for $ 20 per share. On June 30, 2020, similar options were being traded at $3,100. On August 18, 2020, when the option value was $ 12,000, Omega settles the option for cash. On August 18, 2020, KI settles the option for cash when the option value in the market is $12,000.

Prepare the journal entry in the books of KI, if required, to record this transaction.

a. No Journal Entry Required.

b. Derivatives - Financial Assets/Liabilities ........ DR $8,900; Cash ........ CR $8,900

c. Cash ........ DR $12,000; Derivatives - Financial Assets/Liabilities ........ CR $3,100; Gain/Loss On Derivatives ........ CR $8,900

d. Derivatives - Financial Assets/Liabilities ........ DR $700; Cash ........ CR $700 e. Cash ........ DR $12,000; Gain/Loss On Derivatives ........ CR $12,000

While reviewing the March 31, 2020, balance sheet of Business Solutions, Santana Rey notes that the business has built a large cash balance of $68,146. Its most recent bank money market statement shows that the funds are earning an annualized return of 0.64%. S. Rey decides to make several investments with the desire to earn a higher return on the idle cash balance. Accordingly, in April 2020, Business Solutions makes the following investments in trading securities

On June 30, 2020, the fair value of the Johnson & Johnson bonds is $14,700 and the Starbucks notes is $3,700.

Required:
1. Prepare journal entries to record the April purchases of trading securities by Business Solutions.
2. On June 30, 2020, prepare the adjusting entry to record any necessary fair value adjustment to its portfolio of trading securities.

Presented below is information related to Tobias Corp., for the year 2020. Required: Prepare a multiple-step Income Statement and Statement of Retained Earnings for 2020 in good form (with headings). Assume the 300,000 shares of common stock were outstanding during 2020.

Administrative Expenses 70,000

Cost of Goods Sold 1,200,000

Depreciation Expense overstated in 2015 105,000

Dividend revenue 30,000

Dividends Declared 120,000

Effect on prior years of Change in Accounting Principle (credit) 220,000

Gain from sale of land in discontinued component 300,000

Interest Expense 45,000

Interest Revenue 20,000

Loss from operations in discontinued component of business 240,000

Retained Earnings, 1/1/2020 460,000

Sales Discounts 12,000

Sales Return & Allowances 50,000

Sales Revenue $ 1,950,000

Selling Expenses 95,000

Write-off of Goodwill due to Impairment 75,000

Federal tax rate of 20% on all items

A comparative balance sheet for Carla Corporation is presented as follows.

Additional information:

(a)

Prepare a statement of cash flows for 2020 for Carla Corporation. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

A comparative balance sheet for Pharoah Corporation is presented as follows.

Additional information:

Prepare a statement of cash flows for 2020 for Pharoah Corporation. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)