Dreamland Security Services Inc. had the following account balances as of January 1, 2020:

* Terms: Notes Payable with Trust Bank - $15,000 - 1 yr. at 6% int. rate began on 10/1/19.

During 2020 Dreamland Security Services experienced the following transactions:

1. On January 1, 2020, Dreamland purchased land for $10,000 and a building for $90,000. The land was paid for with cash. The building was paid for with $5,000 cash and the remainder was financed with a 10-year notes payable.

2. Paid the accounts payable balance from 2019.

3. Purchase $500 of supplies on account.

4. Purchased 100 alarm systems (inventory) on account at a cost of $200 each.

5. Paid $6,000 of advertising expense during the year.

6. Sold 95 alarm systems for $400 each. All sales were on account. (Note - Be sure to compute cost of goods sold using the FIFO cost flow method.)

7. Paid $7,500 of utilities expense for the year.

8. Billed $65,000 of monitoring services on account for the year.

9. Replenished the petty cash fund on June 30. The fund had $25 cash remaining and receipts of $90 for yard mowing and $35 for postage.

10. After numerous attempts to collect from customers, the company wrote off $650 of uncollectible accounts receivable.

11. Collected $83,000 of accounts receivable during the year.

12. On July 1, 2020, issued $25,000 of 5 percent, five year bonds. The bonds were issued at 98.

13. On October 1, 2020, paid the note and interest owed to Trust Bank (See Beg. Balance in Notes Payable). (Note - Record Interest Expense for January-September)

14. Paid employees a total of $20,000 for salaries for the year. Federal income taxes withheld amounted to $2,200. The net amount of salaries was paid in cash. (Note - $20,000 is the gross salary amount and the actual amount paid in cash will be less due to the federal income taxes withheld. Ignore employer taxes.)

15. Paid the Federal Income Taxes withheld from salaries.

16. Paid the annual installment on the note used to finance the purchase of the building. The note had an interest rate of 5 percent and annual payments of $11,008.

17. Paid a dividend of $10,000 to the shareholders.

Adjustments:

18. There was $275 of supplies on hand at the end of the year.

19. Recognized the expired rent for the office building for the year.

20. Recognized the uncollectible accounts expense for the year using the allowance method. Dreamland estimates that 2 percent of sales on account will not be collected.

21. Recognized depreciation expense on the equipment. The equipment has a six-year life and a $2,500 salvage value. The company uses straight-line depreciation for the equipment. The equipment was purchased in 2018 and a full year of depreciation was taken in 2018 and in 2019. (Only record 2020 depreciation.)

22. Recognized depreciation expense on the service truck. The service truck has a five-year life and an $8,000 salvage value. The company uses double-declining-balance for the service truck. The truck was purchased in 2018 and a full year of depreciation was taken in 2018 and in 2019. (Only record 2020 depreciation.)

23. Recognized depreciation expense on the building. The building has a 40-year life and a $50,000 salvage value. The company uses straight-line depreciation for the building.

Required:

a. Record the above transactions in general journal form. Round all amounts to nearest whole dollar.

b. Prepare a trial balance.

1. A 3-year-old male infant is brought to the emergency room in the middle of February with fever, vomiting and diarrhea for the past day. He has not been able to keep anything down and he has a watery diarrhea. He goes to daycare and many of his classmates are also sick with the same symptoms. He has tachycardia and a fever (100.2 F). His eyes appear sunken, he has active bowel sounds and his stool is watery and pale. His feces was negative for blood and white blood cells.

2.

On an autumn day a number of people became ill working at the Widget Company. It

                is an industrial plant in the heart of Cincinnati, Ohio. Their symptoms ranged from

               simple coughing and other respiratory symptoms to pneumonia. At least one of fifty

                people showing symptoms died. The company voluntarily closed the building upon

               recommendation from the health department. After all of the water and cooling systems

            at the plant were evaluated and disinfected, it reopened and no new cases were

            reported. What is the causative agent at the factory?

3.

A 35-year-old nurse, developed symptoms of cough, myalgias, headache made worse

            by coughing, substernal chest pain, and high fever. She suspected _________?______

            because an outbreak was in progress and she had recently cared for several patients

            with similar symptoms. During the next three days, she was bedridden because of

            weakness and a persistent fever of 103 F. The symptoms gradually resolved over the

            next few days without specific treatment. After 7 - 10 days, she was able to resume her

            usual activities.

n five years, Kent Duncan will retire. He is exploring the possibility of opening a self-service car wash. The car wash could be managed in the free time he has available from his regular occupation, and it could be closed easily when he retires. After careful study, Mr. Duncan determined the following:

1. A building in which a car wash could be installed is available under a five-year lease at a cost of $5,000 per month.

2. Purchase and installation costs of equipment would total $320,000. In five years the equipment could be sold for about 7% of its original cost.

3. An investment of an additional $7,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. After five years, this working capital would be released for investment elsewhere.

4. Both a wash and a vacuum service would be offered. Each customer would pay $1.23 for a wash and $.62 for access to a vacuum cleaner.

5. The only variable costs associated with the operation would be 7.5 cents per wash for water and 10 cents per use of the vacuum for electricity.

6. In addition to rent, monthly costs of operation would be: cleaning, $4,800; insurance, $75; and maintenance, $1,925.

7. Gross receipts from the wash would be about $3,690 per week. According to the experience of other car washes, 60% of the customers using the wash would also use the vacuum.

Mr. Duncan will not open the car wash unless it provides at least a 13% return.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Pronghorn Equipment Co. closes its books regularly on December 31, but at the end of 2017 it held its cash book open so that a more favorable balance sheet could be prepared for credit purposes. Cash receipts and disbursements for the first 10 days of January were recorded as December transactions. The information is given below.

1. January cash receipts recorded in the December cash book totaled $53,800, of which $37,800 represents cash sales, and $16,000 represents collections on account for which cash discounts of $324 were given.

2. January cash disbursements recorded in the December check register liquidated accounts payable of $21,325 on which discounts of $232 were taken.

3. The ledger has not been closed for 2017.

4. The amount shown as inventory was determined by physical count on December 31, 2017. The company uses the periodic method of inventory.

Prepare any entries you consider necessary to correct Pronghorn’s accounts at December 31.

To what extent was Pronghorn Equipment Co. able to show a more favorable balance sheet at December 31 by holding its cash book open? (Compute working capital and the current ratio.) Assume that the balance sheet that was prepared by the company showed the following amounts: (Round ratios to 2 decimal place, e.g. 4.56.)

                                                                  Dr.                                                  Cr.

Cash                                                 $38,740

Accounts receivable                        38,650

Inventory                                           66,480

Accounts payable                                                                                           $45,210

Other current liabilities                                                                                    13,733

                                                                      Per Balance Sheet                                          After Adjustment

Working capital                                             $                                                                        $

Current ratio                                                                              to 1                                                                       to 1

How do we find working capital and current ratio              per balance sheet and         After adjustment

That is all information that I have

Barry Potter and Winnie Weasley are considering making an S election on March 1, 2019, for their C corporation, Omniocular. However, first they want to consider the implications of the following information:

• Winnie is a U.S. citizen and resident.
• Barry is a citizen of the United Kingdom, but a resident of the United States.
• Barry and Winnie each own 50 percent of the voting power in Omniocular. However, Barry’s stock provides him with a claim on 60 percent of the Omniocular assets in liquidation.
• Omniocular was formed under Arizona state law, but it plans on eventually conducting some business in Mexico.

a. Is Omniocular eligible to elect S corporation status?

For the remainder of the problem, assume Omniocular made a valid S election effective January 1, 2019. Barry and Winnie each own 50 percent of the voting power and have equal claim on Omniocular’s assets in liquidation. In addition, consider the following information:

• Omniocular reports on a calendar tax year.
• Omniocular’s earnings and profits as of December 31, 2018, were $55,000.
• Omniocular’s 2018 taxable income was $15,000.
• Omniocular’s assets at the end of 2018 are as follows:

*$110,000 under FIFO accounting.

• On March 31, 2019, Omniocular sold the land for $42,000.
• In 2019, Omniocular sold all the inventory it had on hand at the beginning of the year. This was the only inventory it sold during the year.

• Assume that if Omniocular were a C corporation for 2019, its taxable income would have been $88,500.

2. How much LIFO recapture tax (in total) is Omniocular required to pay and when is the first installment due?
3. How much built-in gains tax, if any, is Omniocular required to pay?
4. How much excess net passive income tax, if any, is Omniocular required to pay?
5. Assume Barry's basis in his Omniocular stock was $40,000 on January 1, 2019. What is his stock basis on December 31, 2019?

For the following questions, assume that after electing S corporation status Barry and Winnie had a change of heart and filed an election to terminate Omniocular’s S election, effective August 1, 2020.

• In 2020, Omniocular reported the following income/expense items:

6. For tax purposes, how would you recommend Barry and Winnie allocate income between the short S corporation year and the short C corporation year if they would like to minimize double taxation of Omniocular’s income?
7. Assume in part (f) that Omniocular allocates income between the short S and C corporation years in a way that minimizes the double taxation of its income. If Barry’s stock basis in his Omniocular stock on January 1, 2020, is $50,000, what is his stock basis on December 31, 2020?
8. When is the earliest tax year in which Omniocular can be taxed as an S corporation again?

Question:

How much LIFO recapture tax (in total) is Omniocular required to pay and when is the first installment due? As per new tax rule, the corporate tax rate is 21% .

Due Date

Total LIFO recapture tax -----------------?             April 15,2019

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e. Assume Barry's basis in his Omniocular stock was $40,000 on January 1, 2019. What is his stock basis on December 31, 2019? (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)
g. Assume in part (f) that Omniocular allocates income between the short S and C corporation years in a way that minimizes the double taxation of its income. If Barry’s stock basis in his Omniocular stock on January 1, 2020, is $50,000, what is his stock basis on December 31, 2020? (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

e.Stock basis   -------------------------?

g. Stock basis ------------------------?

Karantika Ltd operates at capacity and makes glass-topped coffee table. At the end of 2019, Karantika Ltd’s management accountant gathered the following data to prepare budgets for the first six months 2020:

1. Units sales per quarter and the selling price per unit are estimated as follows:

Unit sales Price per unit

January 2,700 $400

February 2,600 $400

March 2,800 $550

April 2,600 $550

May 2,650 $500

June 2,600 $500

July 3,000 $500

August 3,000 $550

Sales on November 2019 were 2,500 units and on December 2,400 units at a selling price of $450.

20% of sales are cash sales and 80% are credit sales. From experience, Karantika Ltd collected 40% of credit sales within the month of sale, 30% in the following month and 25% in two months after the month of sale. 5% of credit sales is uncollectable. The bad debt is calculated at the end of six month.

2. The beginning inventories (BI) on 1 January 2020 and the desired ending inventories (EI) at the end of each month are as follows:

3. Materials and labour requirements

Direct materials:

Wood: 2 board meters (b.m.) per table

Glass: 1 sheet per table

Direct manufacturing labour: 4 hours per table

4. Costs of direct materials and labour:

Wood: $16 per b.m.

Glass: $22 per sheet

Direct labour: $25 per labour-hour

5. Direct materials are purchased in the month of production and are paid 60% in the month of purchase and 40% in the following month. Wages and salaries are paid monthly.
6. Variable manufacturing overhead is $25 per direct manufacturing labour-hour. There is also $210,000 in fixed manufacturing overhead costs per month. Fixed costs include $40,000 depreciation of factory equipment. The fixed manufacturing overhead rate is based on the number of units produced budgeted every six months, at the beginning of each semester, calculated dividing the budgeted fixed overhead costs by the budgeted number of units produced for the semester. Variable and fixed costs are paid in the month incurred.
7. Sales commissions are paid monthly at the rate of 10% of month’s sales revenue. There is $160,000 in fixed non-manufacturing costs (administrative expenses) budgeted per month including $20,000 depreciation costs of office equipment. Variable and fixed non-manufacturing costs are paid in the month incurred.
8. Karantika Ltd has estimated the following payments in the first semester 2020:

January: Loan for $40,000 plus interest payable at 31 December 2019 for $2,000 were paid on 2 January 2020.

End of January: Dividends $100,000

Beginning of May: Purchase of land $200,000

Beginning of June: Purchase of equipment for $300,000. Estimated of useful life 5 year with zero residual value.

9. Karantika Ltd maintain a 18% open line of credit for $400,000. Interests are paid at the end of each month. Karantika Ltd maintains a minimum cash balance of $20,000. The company borrows on the first day of the month and repays loans on the last day of the month, both in multiples of $1,000. The income tax is 30%.
10. Karantika Ltd’s balance sheet at 31 December 2019 is as follows:

*At the beginning of the year there is no allowance of doubtful debt

** Account payable is from the direct material purchase.

Required:

Prepare a monthly master budget for Karantika Ltd’s for the first semester 2020. The following component budgets must be included ( round the number with two decimals):

1. Sales revenue budget
2. Production budget (in units)
3. Direct materials usage and purchases budget for each direct materials and total direct materials (in units and dollars)
4. Direct manufacturing labour budget
5. Manufacturing overhead budget
6. Manufacturing overhead rate for the semester
7. Ending finished goods inventory budget (unit cost and total cost) at June 2020.
8. Selling and administrative expenses budget
9. Cash budget
10. Cost of goods sold at 30 June 2020
11. Budgeted income statement for the first semester 2020
12. Budgeted balance sheet as of 30 June 2020 (including separately the two direct materials inventory)

Note. There is no beginning and ending balance of WIP in each month.

Karantika Ltd operates at capacity and makes glass-topped coffee table. At the end of 2019, Karantika Ltd’s management accountant gathered the following data to prepare budgets for the first six months 2020: Units sales per quarter and the selling price per unit are estimated as follows: Unit sales Price per unit January 2,700 $400 February 2,600 $400 March 2,800 $550 April 2,600 $550 May 2,650 $500 June 2,600 $500 July 3,000 $500 August 3,000 $550 Sales on November 2019 were 2,500 units and on December 2,400 units at a selling price of $450. 20% of sales are cash sales and 80% are credit sales. From experience, Karantika Ltd collected 40% of credit sales within the month of sale, 30% in the following month and 25% in two months after the month of sale. 5% of credit sales is uncollectable. The bad debt is calculated at the end of six month. The beginning inventories (BI) on 1 January 2020 and the desired ending inventories (EI) at the end of each month are as follows: BI (1/1/19) EI (end of each month) Tables:500 (at $210/unit) 20% of following month estimated sales Wood: 1,400 b.m. 25% b.m. needed for next month’s budgeted production (units) Glass 500 sheets 20% sheets needed for next month’s budgeted production (units) Materials and labour requirements Direct materials: Wood: 2 board meters (b.m.) per table Glass: 1 sheet per table Direct manufacturing labour: 4 hours per table Costs of direct materials and labour: Wood: $16 per b.m. Glass: $22 per sheet Direct labour: $25 per labour-hour Direct materials are purchased in the month of production and are paid 60% in the month of purchase and 40% in the following month. Wages and salaries are paid monthly. Variable manufacturing overhead is $25 per direct manufacturing labour-hour. There is also $210,000 in fixed manufacturing overhead costs per month. Fixed costs include $40,000 depreciation of factory equipment. The fixed manufacturing overhead rate is based on the number of units produced budgeted every six months, at the beginning of each semester, calculated dividing the budgeted fixed overhead costs by the budgeted number of units produced for the semester. Variable and fixed costs are paid in the month incurred. Sales commissions are paid monthly at the rate of 10% of month’s sales revenue. There is $160,000 in fixed non-manufacturing costs (administrative expenses) budgeted per month including $20,000 depreciation costs of office equipment. Variable and fixed non-manufacturing costs are paid in the month incurred. Karantika Ltd has estimated the following payments in the first semester 2020: January: Loan for $40,000 plus interest payable at 31 December 2019 for $2,000 were paid on 2 January 2020. End of January: Dividends $100,000 Beginning of May: Purchase of land $200,000 Beginning of June: Purchase of equipment for $300,000. Estimated of useful life 5 year with zero residual value. Karantika Ltd maintain a 18% open line of credit for $400,000. Interests are paid at the end of each month. Karantika Ltd maintains a minimum cash balance of $20,000. The company borrows on the first day of the month and repays loans on the last day of the month, both in multiples of $1,000. The income tax is 30%. Karantika Ltd’s balance sheet at 31 December 2019 is as follows: ASSETS LIABILITIES Cash 32,000 Accounts payable ** 64,000 Accounts receivable * 700,200 Interest payable 2,000 Inventory: Wood 22,400 Loan payable 40,000 Inventory: Glass 11,000 SHAREHOLDER’S EQUITY Inventory: Finished goods 105,000 Share capital 801,600 Plant and equipment, net 450,000 Retained earnings 413,000 Total assets 1, 320,600 Total Liabilities and Shareholder’s equity 1,320,600 *At the beginning of the year there is no allowance of doubtful debt ** Account payable is from the direct material purchase. Required: Prepare a monthly master budget for Karantika Ltd’s for the first semester 2020. The following component budgets must be included ( round the number with two decimals): Sales revenue budget Production budget (in units) Direct materials usage and purchases budget for each direct materials and total direct materials (in units and dollars) Direct manufacturing labour budget Manufacturing overhead budget Manufacturing overhead rate for the semester Ending finished goods inventory budget (unit cost and total cost) at June 2020. Selling and administrative expenses budget Cash budget Cost of goods sold at 30 June 2020 Budgeted income statement for the first semester 2020 Budgeted balance sheet as of 30 June 2020 (including separately the two direct materials inventory) Note. There is no beginning and ending balance of WIP in each month. Can you please
do the cash disbursements, cash collections manufacturing overhead
budget, cash budget?

You want to know if there is a relationship between surgeons’ surgical experience and surgical site infection (SSI) rates. Since SSI’s are relatively rare (infections develop in roughly 1-3 of every 100 patients who have surgery), you decide to do a case control study in which you select hospital patients who experienced a SSI and hospital patients who did not, and compare patients’ exposures to surgeons with <10 years of experience, and >10 years of experience. Assume you have access to data collected by a hospital’s infection control department from 2008-2010.

You enroll a total of 400 patients in your study. From the infection control records, you select 200 patients who developed a SSI in the period 2008-2010. Out of those 200 patients, 36 had a surgeon with >10 years experience. Out of the total 400 patients, you found that 232 had a surgeon with <10 years experience.

A) Based on the above data, fill in Table 1, name and calculate the appropriate crude measure of association for this study.

Table 1.

After talking to the surgery department you learn that the surgeons with <10 years of experience tended to perform surgery on sicker patients. Because you are unsure whether a patients’ disease severity may influence the association between surgeon experience and SSI, you decide to stratify the results by disease severity.

The following 2x2 tables summarize the results of your stratification:

SEVERE DISEASE

NON-SEVERE DISEASE

B) Calculate the appropriate measure of association for each stratum (ie. for severe disease and non-severe disease).

C) Compare the measures of association in parts a and b. Do you think that disease severity confounds the relationship between surgeon experience and SSI? Why, or why not? Do you think that this association between surgeon experience and surgical site infection is a true association or does something else explain the association? Justify your answer.

Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda’s marginal income tax rate is 37 percent and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). If Amanda organizes BAL as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. Also, she is eligible to claim a full deduction for qualified business income on BAL’s income. Assume that BAL will distribute half of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar amount.)

How much cash after taxes would Amanda receive from her investment in the first year if BAL is organised as either an LLC or a C corporation ?

After-tax cash flow for LLC ;

C corporation ?