Q 1:
On July 8, 2016, Celtic corporation, a calendar year taxpayer, purchased an apartment building for $1,500,000, of which $250,000 was allocatble to the land. On September 10, 2018, Celtic sells the building. Give the corporation's allowable depreciation deductions for the apartment building both for the year of purchase (2016) and for the year of sale (2018).
Q 2:
In January of 201 8, Matt purchased a Mercedes sedan for $95,000 to be used in his business as a self-employed realtor. Matt drove the care 80 percent of the time for business. What is the maximum amount that Matt may deduct m" 2018 assuming he elects to take bonus depreciation on this passenger car?
Q 3:
On May 19, 2018, Axe Corporation purchased office furniture (7-year property) costing $2,300,000 and computer equipment (5-year property) costing $400,000. Axe elects _not to take bonus depreciation on these assets but wants to take Section 179 expensing and MACRS depreciation instead. Compute Axe's Section 179 expense deduction and its MACRS depreciation deduction assuming that any expensing is used first on the 7-year assets before it is used on the 5-year assets. Assume also that Axe's taxable income for the year is $2 million before deductions are taken.
Q 4:
On November 1, 2015, Jenkins Corporation bought equipment (7-year property) for $190,000 and land improvements (15-year property) costing $86,000, for its new factory building which it purchased on September 1, 2015 for $1,200,000 of which $300,000 was allocable to the land. These were the only asset purchases for Jenkins during 2015. On June 6, 2018, Jenkins sold the building along with the equipment and land improvements. Compute Jenkins' allowable depreciation for the factory building, the equipment, and the land improvements both for the year of purchase 2015 and the year of sale 2018 assuming that Section 179 expensing and bonus depreciation were not used on any of these assets.
In: Accounting
|
Blossom Co. |
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|---|---|---|---|---|---|---|---|---|
| Cash | $19,100 | Accounts payable | $28,400 | |||||
| Accounts receivable | $38,200 | Notes payable | 14,000 | |||||
| Less: Allowance for doubtful accounts | 2,100 | 36,100 | Unearned revenue | 2,800 | ||||
| Inventory | 61,500 | Total current liabilities | $45,200 | |||||
| Prepaid expenses | 6,100 | |||||||
| Total current assets | $122,800 | |||||||
The following errors in the corporation’s accounting have been
discovered:
| 1. | Keane collected $4,700 on December 20, 2017 as a down payment for services to be performed in January, 2018. The company’s controller recorded the amount as revenue. | |
| 2. | The inventory amount reported included $2,200 of merchandise that had been received on December 31, 2017 but for which no purchase invoices had been received or entered. Of this amount, $1,000 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30. | |
| 3. | Sales for the first day in January 2018 in the amount of $11,400 were entered in the sales journal as of December 31, 2017. Of these, $7,300 were sales on account and the remainder were cash sales. | |
| 4. | Cash, collected in December 2017, but entered as received in January 2018 totaled $2,900. Of this amount, $2,646 was received on account after cash discounts of 2% had been deducted; the remainder was collected for cash sales. | |
| 5. | Cash of $4,300 received in January 2018 was entered as received in December 2017. This cash represented the proceeds of a bank loan that matures in July 2018. | |
| 6. | January 2018 cash disbursements entered as of December 2017 included payments of accounts payable in the amount of $8,200, on which a cash discount of 1% was taken. |
(a1)
Calculate the following adjusted balances.
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Cash |
$enter a dollar amount |
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Accounts Receivable |
$enter a dollar amount |
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Inventory |
$enter a dollar amount |
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Accounts Payable |
$enter a dollar amount |
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Notes Payable |
$enter a dollar amount | |
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Unearned Revenue |
$enter a dollar amount |
In: Accounting
Miracle Tool, Inc., sells a single product (a combination screwdriver, pliers, hammer, and crescent wrench) exclusively through television advertising. The comparative income statements and balance sheets are for the past two years.
Additional Information
The following information regarding the company’s operations in 2018 is available from the company’s accounting records.
Early in the year, the company declared and paid a $4,000 cash dividend.
During the year, marketable securities costing $15,000 were sold for $14,000 cash, resulting in a $1,000 nonoperating loss.
The company purchased plant assets for $20,000, paying $2,000 in cash and issuing a note payable for the $18,000 balance.
During the year, the company repaid a $10,000 note payable, but incurred an additional $18,000 in long-term debt as described in Transaction 3.
The owners invested $15,000 cash in the business as a condition of the new loans described in Transaction 4.
| MIRACLE TOOL, INC. | ||||||||
| COMPARATIVE INCOME STATEMENT | ||||||||
| FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2018 | ||||||||
| 2017 | 2018 | |||||||
| Sales | $ | 500,000 | $ | 350,000 | ||||
| Less: Cost of goods sold | 200,000 | 140,000 | ||||||
| Gross profit on sales | $ | 300,000 | $ | 210,000 | ||||
| Less: Operating expenses
(including depreciation of $34,000 in 2017 and $35,000 in 2018) |
260,000 | 243,000 | ||||||
| Loss on sale of marketable securities | –0– | 1,000 | ||||||
| Net income (loss) | $ | 40,000 | $ | (34,000 | ) | |||
| MIRACLE
TOOL, INC. COMPARATIVE BALANCE SHEETS |
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| December 31, | |||||||||||
| 2017 | 2018 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 10,000 | $ | 60,000 | |||||||
| Marketable securities | 20,000 | 5,000 | |||||||||
| Accounts receivable | 40,000 | 23,000 | |||||||||
| Inventory | 120,000 | 122,000 | |||||||||
| Plant and equipment (net of accumulated depreciation) | 300,000 | 285,000 | |||||||||
| Totals | $ | 490,000 | $ | 495,000 | |||||||
| Liabilities & Stockholders' Equity | |||||||||||
| Accounts payable | $ | 50,000 | $ | 73,000 | |||||||
| Accrued expenses payable | 17,000 | 14,000 | |||||||||
| Note payable | 245,000 | 253,000 | |||||||||
| Capital stock (no par value) | 120,000 | 135,000 | |||||||||
| Retained earnings | 58,000 | 20,000 | |||||||||
| Totals | $ | 490,000 | $ | 495,000 | |||||||
Required:
a. Prepare a worksheet for a statement of cash flows.
b. Prepare a statement of cash flows for 2018 by the indirect method.
In: Accounting
Carter, Inc. manufactures pharmaceuticals. Over the past year,
2018, they purchased the following assets (assume all purchases
were made in cash):
A patent for the drug, Axteel, which prevents the spread of
prostate cancer. This drug was being developed by Axtra, Inc. and
was in the final stages of approval by the Food and Drug
Administration. Carter purchased this patent on February 1 for
$5,000,000. They estimate the useful life to be 7 years and started
production of Axteel on June 15, 2018 (after FDA approval).
A pharmaceutical homogenizer for an experimental drug, Terzanz, was purchased on March 15, 2018 for $1,500,000. This drug is being developed to cure Alzheimers. The patent for this drug has yet to be filed with the FDA and initial tests don’t show significant results. The homogenizer has no other alternative uses and Carter estimates its useful life at 5 years.
A start-up company, Vample, Inc. Vample was in the process of developing three new pharmaceuticals and was seen as a major competitor to Carter. Carter purchased their net assets on June 1, 2018 for $23,000,000. At the time of purchase, Vample’s 3 patents were nearing approval by the FDA and Carter planned to start production of all 3 patents on October 1, 2018. Additionally, Vample had the following net assets on their balance sheet (shown as historical cost and fair market value):
Historical Cost
Fair market value
Receivables
$ 500,000
$ 400,000
Inventory $2,500,000 $ 2,500,000
Prop, Plant, Equipment
$7,500,000 $
6,500,000
3 Patents (life = 7 years)
$ 125,000
$ 11,000,000
Customer list (life = 10 years) $
0 $ 1,500,000
Payables
$ 350,000
$ 350,000
Long-term Notes Payable
$2,250,000 $
2,250,000
Instructions
Prepare the journal entries for the three purchases above.
Prepare the adjusting journal entries for the amortization of all
intangible assets, purchased in 2018, as of 12/31/18. Assume all
intangibles are amortized on a straight-line basis.
In: Accounting
Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2017, by issuing 10,500 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On that date, Turner reported a net book value of $110,750. However, its equipment (with a five-year remaining life) was undervalued by $8,850 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $37,900, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years.
The following balances come from the individual accounting records of these two companies as of December 31, 2017:
| Haynes | Turner | |||||
| Revenues | $ | (686,000 | ) | $ | (318,000 | ) |
| Expenses | 490,000 | 149,000 | ||||
| Investment income | Not given | 0 | ||||
| Dividends declared | 100,000 | 80,000 | ||||
The following balances come from the individual accounting records
of these two companies as of December 31, 2018:
| Haynes | Turner | |||||
| Revenues | $ | (799,000 | ) | $ | (390,000 | ) |
| Expenses | 516,000 | 180,500 | ||||
| Investment income | Not given | 0 | ||||
| Dividends declared | 110,000 | 60,000 | ||||
| Equipment | 571,000 | 359,000 | ||||
a. What balance does Haynes’s Investment in Turner account show on December 31, 2018, when the equity method is applied?
b. What is the consolidated net income for the year ending December 31, 2018?
c-1. What is the consolidated equipment balance as of December 31, 2018?
c-2. Would this answer be affected by the investment method applied by the parent?
d. Prepare entry *C for the beginning of the Retained Earnings account on a December 31, 2018 by using initial value, partial equity and equity method
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d.
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In: Accounting
[The following information applies to the questions displayed
below.]
Income statement and balance sheet data for The Athletic Attic are provided below.
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Required:
1. Calculate the following risk ratios for 2018 and 2019: (Round your answers to 1 decimal place.)
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2. Calculate the following profitability ratios for 2018 and 2019: (Round your answers to 1 decimal place.)
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In: Accounting
Edison Leasing leased
high-tech electronic equipment to Manufacturers Southern on January
1, 2018. Edison purchased the equipment from International Machines
at a cost of $119,300. (FV of $1, PV of $1, FVA of $1, PVA of $1,
FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from
the tables provided.)
| Related Information: | |
| Lease term | 2 years (8 quarterly periods) |
| Quarterly rental payments | $16,500 at the beginning of each period |
| Economic life of asset | 2 years |
| Fair value of asset | $119,300 |
| Implicit interest rate | 12% |
| (Also lessee’s incremental borrowing rate) | |
Required:
Prepare a lease amortization schedule for Edison Leasing from the beginning of the lease through January 1, 2019. Edison’s fiscal year ends December 31. (Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.)
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Prepare the appropriate General Journal entries for Edison Leasing from the beginning of the lease through January 1, 2019. Edison’s fiscal year ends December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in millions. Round your intermediate and final answers to nearest whole dollar.)
1. Record the lease.
2.Record cash received.
3 Record cash received.
4. Record cash received.
5. Record cash received.
6. Record interest receivable.
7.Record cash received..
In: Accounting
TraderTrader
Investments completed the following investment transactions during 2018:
Requirement 1. Journalize Trader's investment transactions. Explanations are not required. ?(Record debits? first, then credits. Exclude explanations from journal entries.
Jan.? 14: Purchased 900 shares of Velcon ?stock, paying $55 per share. The investment represents 2% ownership in Velcon's voting stock.
Trader does not have significant influence over Velcon.
Trader intends to hold the investment for the indefinite future.
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Date |
Accounts |
Debit |
Credit |
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Jan. 14 |
Unrealized Holding Gain—Available-for-Sale |
49,500 |
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Cash |
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Aug.? 22: Received a cash dividend of $ 0.34 per share on the Velcon stock.
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Date |
Accounts |
Debit |
Credit |
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Aug. 22 |
Cash |
306 |
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Dividend Revenue |
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Dec.? 31: Adjusted the investment to its current market value of $53 per share.
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Date |
Accounts |
Debit |
Credit |
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Dec. 31 |
Cash |
47,700 |
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Loss on Disposal |
1,800 |
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Unrealized Holding Loss—Available-for-Sale |
49,500 |
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Dec.? 31: Velcon reported net income of $180,000 for the year ended 2018.
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Date |
Accounts |
Debit |
Credit |
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Dec. 31 |
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Requirement 2. Classify and prepare a partial balance sheet for Trader?'s Velcon investment as of December? 31, 2018.
?(Use a minus sign or parentheses to enter a loss. If a box is not used in the balance? sheet, leave the box? empty; do not select a label or enter a? zero.)
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Trader Investments |
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Balance Sheet (Partial) |
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December 31, 2018 |
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Current Assets: |
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Long-term Assets: |
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Stockholders' Equity |
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Accumulated Other Comprehensive Income: |
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Requirement 3. Prepare a partial income statement for Trader Investments for year ended December? 31, 2018.
?(Use a minus sign or parentheses to enter a? loss.)
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Trader Investments |
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Income Statement (Partial) |
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For the Year Ended December 31, 2018 |
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Other Income and (Expenses): |
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In: Accounting
Income statements and balance sheets data for Virtual Gaming Systems are provided below.
| VIRTUAL GAMING SYSTEMS Income Statements For the year ended December 31 |
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| 2019 | 2018 | |
| Net sales | $3,555,000 | $3,081,000 |
| Cost of goods sold | 2,489,000 | 1,959,000 |
| Gross profit | 1,066,000 | 1,122,000 |
| Expenses: | ||
| Operating expenses | 964,000 | 867,000 |
| Depreciation expense | 39,000 | 31,500 |
| Loss on sale of land | 0 | 8,900 |
| Interest expense | 22,500 | 19,500 |
| Income tax expense | 8,900 | 52,500 |
| Total expenses | 1,034,400 | 979,400 |
| Net income | $ 31,600 | $ 142,600 |
| VIRTUAL GAMING SYSTEMS Balance Sheets December 31 |
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| 2019 | 2018 | 2017 | |
| Assets | |||
| Current assets: | |||
| Cash | $ 214,500 | $195,000 | $153,000 |
| Accounts receivable | 88,500 | 90,000 | 69,000 |
| Inventory | 138,500 | 114,000 | 144,000 |
| Prepaid rent | 14,900 | 12,900 | 7,080 |
| Long-term assets: | |||
| Investment in bonds | 114,000 | 114,000 | 0 |
| Land | 309,000 | 219,000 | 249,000 |
| Equipment | 309,000 | 279,000 | 219,000 |
| Less: Accumulated depreciation | (121,500) | (82,500) | (51,000) |
| Total assets | $1,066,900 | $941,400 | $790,080 |
| Liabilities and Stockholders' Equity | |||
| Current liabilities: | |||
| Accounts payable | $ 118,200 | $ 75,000 | $134,780 |
| Interest payable | 11,700 | 7,800 | 3,900 |
| Income tax payable | 12,900 | 19,500 | 14,900 |
| Long-term liabilities: | |||
| Notes payable | 490,000 | 294,000 | 234,000 |
| Stockholders' equity: | |||
| Common stock | 309,000 | 309,000 | 309,000 |
| Retained earnings | 125,100 | 236,100 | 93,500 |
| Total liabilities and stockholders’ equity | $1,066,900 | $941,400 | $790,080 |
Required:
1. Calculate the following risk ratios for 2018 and 2019: (Round your answers to 1 decimal place.)
2. Calculate the following profitability ratios for 2018 and 2019: (Round your answers to 1 decimal place.)
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In: Accounting
Exercise 3-21
On January 1, 2018, the general ledger of Dynamite Fireworks
includes the following account balances:
| Accounts | Debit | Credit | ||||
| Cash | $ | 25,800 | ||||
| Accounts Receivable | 7,200 | |||||
| Supplies | 5,100 | |||||
| Land | 70,000 | |||||
| Accounts Payable | 5,200 | |||||
| Common Stock | 85,000 | |||||
| Retained Earnings | 17,900 | |||||
| Totals | $ | 108,100 | $ | 108,100 | ||
During January 2018, the following transactions occur:
| January | 2 | Purchase rental space for one year in advance, $12,000 ($1,000/month). | |
| January | 9 | Purchase additional supplies on account, $5,500. | |
| January | 13 | Provide services to customers on account, $27,500. | |
| January | 17 | Receive cash in advance from customers for services to be provided in the future, $5,700. | |
| January | 20 | Pay cash for salaries, $13,500. | |
| January | 22 | Receive cash on accounts receivable, $26,100. | |
| January | 29 | Pay cash on accounts payable, $6,000. |
The following information is available on January 31, 2018.
Rent for the month of January has expired.
Supplies remaining at the end of January total $4,800.
By the end of January, $4,700 of services has been provided to customers who paid in advance on January 17.
Unpaid salaries at the end of January are $4,400.
| Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 - 7). Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances. | |||
| 2. | Record the adjusting entries in the 'General Journal' tab (these are shown as items 8-11). | ||
| 3. | Review the adjusted 'Trial Balance' as of January 31, 2018. | ||
| 4. | Prepare an income statement for the period ended January 31, 2018, in the 'Income Statement' tab. | ||
| 5. | Prepare a classified balance sheet as of January 31, 2018 in the 'Balance Sheet' tab. | ||
| 6. | Record the closing entries in the 'General Journal' tab (these are shown as items 12 and 13). | ||
| 7. |
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In: Accounting