Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $250,000, $220,000, and $110,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations:

• Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year.
• Profits and losses are allocated according to the following plan:

1. A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by that individual during the year.
2. Interest is credited to the partners’ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings).
3. An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed.
4. Any remaining partnership profit or loss is to be divided evenly among all partners.

Because of financial shortfalls encountered in getting the business started, Gray invests an additional $9,600 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monet’s entrance into the firm; the general provisions continue to be applicable.

The billable hours for the partners during the first three years of operation follow:

The partnership reports net income for 2016 through 2018 as follows:

Each partner withdraws the maximum allowable amount each year.

1. Determine the allocation of income for each of these three years.

2. Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2018.

Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $390,000, $360,000, and $180,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations: - Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year. - Profits and losses are allocated according to the following plan: 1. A salary allowance is credited to each partner in an amount equal to $7 per billable hour worked by that individual during the year. 2. Interest is credited to the partners’ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings). 3. An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed. 4. Any remaining partnership profit or loss is to be divided evenly among all partners. Because of financial shortfalls encountered in getting the business started, Gray invests an additional $8,600 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monet’s entrance into the firm; the general provisions continue to be applicable. The billable hours for the partners during the first three years of operation follow: 2016 2017 2018 Gray 1,890 3,600 2,060 Stone 1,620 2,100 1,800 Lawson 3,100 1,560 1,490 Monet 0 1,370 1,760 The partnership reports net income for 2016 through 2018 as follows: 2016 $ 101,000 2017 (38,400) 2018 243,000 Each partner withdraws the maximum allowable amount each year. A. Determine the allocation of income for each of these three years. B. Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2018.

ginocera Inc. is a designer, manufacturer, and distributor of low-cost, high-quality stainless steel kitchen knives. A new kitchen knife series called the Kitchen Ninja was released for production in early 2016. In January, the company spent $600,000 to develop a late-night advertising infomercial for the new product. During 2016, the company spent $1,402,000 promoting the product through these infomercials, and $819,000 in legal costs. The knives were ready for manufacture on January 1, 2016. Ginocera uses a job order cost system to accumulate costs associated with the kitchen knife. The unit direct materials cost for the knife is:

Hardened steel blanks (used for knife shaft and blade) $3.85 Wood (for handle) 1.40 Packaging 0.40 The production process is straightforward. First, the hardened steel blanks, which are purchased directly from a raw material supplier, are stamped into a single piece of metal that includes both the blade and the shaft. The stamping machine requires one hour per 250 knives.

After the knife shafts are stamped, they are brought to an assembly area where an employee attaches the handle to the shaft and packs the knife into a decorative box. The direct labor cost is $0.45 per unit. The knives are sold to stores. Each store is given promotional materials, such as posters and aisle displays. Promotional materials cost $60 per store. In addition, shipping costs average $0.15 per knife.

Total completed production was 1,200,000 units during the year. Other information is as follows:

Number of customers (stores) 58,500

Number of knives sold 1,128,000

Wholesale price (to store) per knife $17

Factory overhead cost is applied to jobs at the rate of $650 per stamping machine hour after the knife blanks are stamped. There were an additional 28,000 stamped knives, handles, and cases waiting to be assembled on December 31, 2016. Required:

A. Prepare an annual income statement for the Kitchen Ninja knife series, including supporting calculations, from the information provided. Refer to the list of Amount Descriptions for exact wording of the answer choices for text entries.

* B. Determine the balances in the work in process and finished goods inventories for the Kitchen Ninja knife series on December 31, 2016.* * In your computations, if required, round interim per-unit costs to two decimal places.

Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $330,000, $300,000, and $160,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations:

Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year.

Profits and losses are allocated according to the following plan:

A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by that individual during the year.

Interest is credited to the partners’ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings).

An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed.

Any remaining partnership profit or loss is to be divided evenly among all partners.

Because of financial shortfalls encountered in getting the business started, Gray invests an additional $9,200 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monet’s entrance into the firm; the general provisions continue to be applicable.

The billable hours for the partners during the first three years of operation follow:

The partnership reports net income for 2016 through 2018 as follows:

Each partner withdraws the maximum allowable amount each year.

Determine the allocation of income for each of these three years.

Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2018.

Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $380,000, $350,000, and $175,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations:

• Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year.
• Profits and losses are allocated according to the following plan:

1. A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by that individual during the year.
2. Interest is credited to the partners’ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings).
3. An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed.
4. Any remaining partnership profit or loss is to be divided evenly among all partners.

Because of financial shortfalls encountered in getting the business started, Gray invests an additional $9,700 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monet’s entrance into the firm; the general provisions continue to be applicable.

The billable hours for the partners during the first three years of operation follow:

The partnership reports net income for 2016 through 2018 as follows:

Each partner withdraws the maximum allowable amount each year.

1. Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2018.

Lydell Capital, Inc., makes investments in trading securities. Selected income statement items for the years ended December 31, 2016 and 2017, plus selected items from comparative balance sheets, are shown in the income statement and balance sheet below:

There were no dividends.

Determine the missing items.

Feedback

Operating Income-2014: Do this after you have calculated requirements (Unrealized Gain (Loss)) and (Net Income). Then subtract (Unrealized Gain (Loss)) from (Net Income).

Unrealized Gain (Loss)-2014: 2014 valuation allowance minus 2013 valuation allowance. Remember when you subtract a negative number the resulting effect is to add the amount.

Net Income-2014: 2014 retained earnings minus 2013 retained earnings.

Operaing Income-2015: The result of working backwards for 2015 such that net income plus the absolute value of the loss is equal to operating income.

Learning Objective 4.

Feedback

Trading Investments, at Fair Value-Dec. 31, 2013: The result of adding trading investments plus the valuation allowance for 12/31/13.

Trading Investments, at Fair Value-Dec. 31, 2014: The result of adding trading investments plus the valuation allowance for 12/31/14.

Valuation Allowance for Trading Investments-Dec. 31, 2015: 2014 valuation allowance + 2015 unrealized loss.

Trading Investments, at Fair Value-Dec. 31, 2015: The result of adding trading investments plus valuation allowance for 12/31/15.

Retained Earnings-Dec. 31, 2015: The result of retained earnings for 12/31/14 plus net income 2015.

Learning Objective 4.

Wee Corporation began operations in 2011. It reported book income or loss of $(4,000), $5,000, and $5,000 during 2011-2013 respectively.

During 2011-2013, the difference between taxable income and book income resulted from the following items:

1) During 2011-2013, Wee accrued post-retirement healthcare costs (OPEB) of $2,000, $4,000, and $6,000 respectively. The OPEB costs are deductible for tax purposes when paid in 2018.

2) During 2013, Wee reported $3,000 of tax-exempt interest on municipal securities.

Tax rates for 2011-2014 were as follows.                 

Wee carries losses back whenever possible.

During 2014, the current year, Wee’s income statement and tax returns were as follows:

Other information:

1. Installment sales are taxed when collected, equally in 2016-2018.

2. Interest income is earned on tax-exempt securities.

3. Bad debts are deductible for taxes when the accounts are written off, equally in 2015 and 2016.

4. Depreciation expense will reverse equally in 2015 and 2016.

5. Wee determined that 60% of net operating loss carryforward would not be realized. Wee expects to earn no taxable income in 2015 and 2016.

6. On December 31, 2014, Congress enacted new tax rates, effective January 1, 2015. The new rates will be

2015 will 20%   

2016 and beyond 40%

1. Prepare a schedule of Wee’s temporary differences and carryforwards and related deferred tax assets and liabilities at December 31, 2013.

Temporary difference and Carryforwards            Rate                 DTA                DTL

Taxable / (Deductible)

2. Prepare a schedule of Wee’s temporary differences and carryforwards and related deferred tax assets and liabilities at December 31, 2014.

Temporary difference and Carryforwards            Rate                 DTA                DTL

Taxable / (Deductible)

3. Prepare Wee’s journal entries for 2014 taxes.

Spreadsheet and Statement of Cash Flows

The following information was taken from Lamberson Company's accounting records:

Additional information for the year:

a.      

b.     Dividends declared and paid totaled $700.

c.     On January 1, 2016, convertible preferred stock that had originally been issued at par value were converted into 500 shares of common stock. The book value method was used to account for the conversion.

d.     Long-term nonmarketable investments that cost $1,600 were sold for $2,300.

e.     The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the year.

f.      Equipment with a cost of $2,000 and a book value of $300 was sold for $100. The company uses one Accumulated Depreciation account for all depreciable assets.

g.     Equipment was purchased at a cost of $16,200.

h.     The 12% bonds payable were issued on August 31, 2016, at 97. They mature on August 31, 2026. The company uses the straight-line method to amortize the discount.

i.       Taxable income was less than pretax accounting income, resulting in a $396 increase in deferred taxes payable.

j.      Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by $300 to a $3,800 fair value at year-end by adjusting the related allowance account.

Required

1.     Prepare a spreadsheet to support Lamberson Company's 2016 statement of cash flows. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

1.     Prepare the statement of cash flows.

2. Compute the cash flow from operations to sales ratio and the profit margin ratio for 2016. Round your answers to one decimal place.

a.     Cash flows from operations ratio :%

b.     Profit margin:  %

Income statements and balance sheets follow for The New York Times Company. Refer to these financial statements to answer the requirements.

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Continued next page

Required:

a. Compute net operating profit after tax (NOPAT) for 2016 and 2015. Compute net operating assets (NOA) for 2016 and 2015. Assume that combined federal and state statutory. Compute return on net operating assets (RNOA) for 2016 and 2015. Net operating assets are $397,299 thousand in 2014.

b. Compute return on common shareholders equity (ROE) for 2016 and 2015. Stockholders’ equity attributable to New York Times Company in 2014 is $726,328 thousand.

c. What is nonoperating return component of ROE for 2016 and 2015?

d.    Comment on the difference between ROE and RNOA. What inference do you draw from this comparison?

Please Show Work - Excel or Word Answer is Prefered.