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devry ACCT557 Final exam

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Question. (TCO B) At the beginning of 2012, Barbara, Inc. has a deferred tax asset of $8,000 and deferred tax liability of $6,500. In 2012, pretax financial income was $600,000 and the tax rate was 35%.Pretax income included:Interest income from municipal bonds $25,000Accrued warranty costs, estimated to be used in 2013 $74,000Prepaid rent expense, will be used in 2013 $16,000Installment sales revenue, to be collected in 2013 $45,000Operating loss carryforward $36,000Deferred tax liability ending balance December 31, 2012 is (Points: 5)$14,850.$15,750.$21,350.$41,650.2. (TCO C) Presented below is pension information related to Baked Goods, Inc. for the year 2013.Service cost $85,000Interest on projected benefit obligation $52,000Interest on vested benefits $28,000Amortization of prior service cost due to increase in benefits $15,000Expected return on plan assets $56,000The amount of pension expense to be reported for 2013 is (Points: 5)$81,000.$124,000.$180,000.$96,000.3. (TCO C) Bunny Hopping, Inc. sponsors a defined-benefit pension plan. The following data relate to the operation of the plan for the year 2013.Service cost $150,000Contributions to the plan $120,000Actual return on plan assets $130,000Projected benefit obligation (beginning of year) $1,800,000Fair value of plan assets (beginning of year) $1,650,000The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2013 is (Points: 5)$150,000.00.$200,000.00.$165,000.00.$330,000.00.4. (TCO F) Balancing Act, Inc recognized net income of $489,000 including $7,500 in depreciation expense.Additional changes from the balance sheet are as follows.Accounts Receivable $2,600 decreasePrepaid Expenses $4,500 decreaseInventory $26,400 increaseAccrued Liabilities $2,300 decreaseAccounts Payable $3,800 increaseCompute the net cash from operating activities based on the above information. (Points: 5)$501,100$453,900$519,200$478,7005. (TCO G) The disclosure of accounting policies is important to the financial statements when determining (Points: 5)whether or not the accounting policies are consistently applied from year to year.the value of obsolete items included in ending inventory.whether or not the working capital position is adequate for future operations.net income for the year.6. (TCO G) Adventure, Inc is a company that operates in four different divisions. The following information relating to each segment is available for 2013.Sales revenue Operating profit (loss) Identifiable assetsA $102,000 $37,200 $67,200B $126,000 $(19,200) $98,400C $300,000 $134,400 $768,000D $24,000 $4,800 $42,000Required:For which of the segments would information have to be disclosed in accordance with professional pronouncements? (Points: 5)Segments A, B, C, and DSegments A, B, and CSegments A and BSegments A and D------------------------------------------------------------------------------------------------------------------------------------------1. (TCO B) Buffy, Inc. qualifies to use the installment-sales method for tax purposes and sold an investment on an installment basis. The total gain of $750,000 was reported for financial reporting purposes in the period of sale. The installment period is 3 years;one third of the sale price is collected in 2012 and the rest in 2013. The tax rate was 40% in 2012, 35% in 2013, and 35% in 2014. The accounting and tax data is shown below.Financial Accounting Tax Return2012Income before temporary difference $1,800,000 $1,800,000Temporary difference $750,000 $250,000Income $2,550,000 $2,050,0002013Income before temporary difference $1,500,000 $1,500,000Temporary difference $- $250,000Income $1,500,000 $1,750,0002014Income before temporary difference $1,250,000 $1,250,000Temporary difference $- $250,000Income $1,250,000 $1,500,000Required:1) Prepare the journal entries to record the income tax expense, deferred income taxes, and the income taxes payable for 2012, 2013, and 2014. No deferred income taxes existed at the beginning of 2012.2) Explain how the deferred taxes will appear on the balance sheet at the end of each year. (Assume Installment Accounts Receivable is classified as a current asset.)3) Show the income tax expense section of the income statement for each year, beginning with ?Income before income taxes.? (Points: 40)2. (TCO D) Bing Leasing, Inc. agrees to lease equipment to Boyd, Inc. on January 1, 2012. They agree on the following terms:1) The normal selling price of the equipment is $1,500,000 and the cost of the asset to Bing Leasing, Inc. was $135,000.2) The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life).3) The lease begins on January 1, 2012 and payments will be in equal annual installments.4) At the end of the lease, the equipment will revert to Bing Leasing, Inc. and have an unguaranteed residual value of $150,000. Their implicit interest rate is 10%.5) Boyd will pay all maintenance, insurance, and tax costs directly and annual payments of $160,000 on January 1 of each year.6) Bing Leasing, Inc. incurred costs of $10,600 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectability of the lease payments is reasonably predictable.Required:a) Determine what type of lease this would be for the lessor and calculate the following (show all work).Lease ReceivableSales PriceCost of Salesb) Prepare Bing's amortization schedule for the lease terms.c) Prepare all the journal entries for Kingdom for 2012. Assume a calendar year fiscal year. (Points: 40)3. (TCO F) Financial data of Beautiful Beadwork Company for 2013 and 2012 are presented below.Beautiful Beadwork CompanyCOMPARATIVE BALANCE SHEETAS OF DECEMBER 31, 2013 AND 20122013 2012Cash $ 364,000 $ 322,000Receivables $ 218,400 $ 168,000Inventory $ 252,000 $ 308,000Plant assets $ 224,000 $ 189,000Accumulated depreciation $ (112,000) $ (106,400)Long-term investments (held-to-maturity) $ 112,000 $ 130,200$ 1,058,400 $ 1,010,800Accounts payable $ 189,000 $ 170,800Accrued liabilities $ 42,000 $ 46,340Bonds payable $ 189,000 $ 232,400Common stock $ 252,000 $ 231,000Retained earnings $ 386,400 $ 330,260$ 1,058,400 $ 1,010,800Beautiful Beadwork CompanyINCOME STATEMENTFor the year ended December 31, 2013Sales 1,050,000Cost of Goods Sold 742,000Gross Margin 308,000Selling and administrative expenses 148,400Income from Operations 159,600Other revenues and gains Gain on sale of investments 9,800Income before tax 169,400Income tax expense 67,760Net Income 101,640Additional information: During the year, $12,600 of common stock was issued in exchange for plant assets. No plant assets were sold in 2012. Cash dividends were $45,500.Required: Prepare a statement of cash flows using the indirect method.(Points: 40)

 

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