A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity factor at 8% for

Response:

A.

Dec. 28, 20Y3

Dr Accounts Receivable - Beasley Co. 18,500

Cr Sales Revenue 18,500

Dec. 28, 20Y3

Dr Cost of Goods Sold 11,200

Cr Inventory 11,200

B.

Jan. 3, 20Y4

Dr Sales Returns and Allowances 4,000

Cr Accounts Receivable - Beasley Co. 4,000

Jan. 3, 20Y4

Dr Inventory 2,350

Cr Cost of Goods Sold 2,350

C. Jan. 7, 20Y4

Dr Cash 14,210

Dr Sales Discount 290

Cr Accounts Receivable - Beasley Co. 14,500

Explanation:

A. Recording the entry for the sale on December 28, 20Y3, using a perpetual inventory system’s net method.

Dec. 28, 20Y3

Dr Accounts Receivable - Beasley Co. 18,500

Cr Sales Revenue 18,500

Dec. 28, 20Y3

Dr Cost of Goods Sold 11,200

Cr Inventory 11,200

B. Journals to record the returns of merchandise

Jan. 3, 20Y4

Dr Sales Returns and Allowances 4,000

Cr Accounts Receivable - Beasley Co. 4,000

Jan. 3, 20Y4

Dr Inventory 2,350

Cr Cost of Goods Sold 2,350

C. Journal entry to document the receipt of amount owed

Jan. 7, 20Y4

Dr Cash 14,210

[(18,500-4,000)-(18,500-4,000)*2% ]

Dr Sales Discount 290

[(18,500-4,000)*2% ]

Cr Accounts Receivable - Beasley Co. 14,500

(18,500-4,000)

Answer:

50%

Explanation:

To determine the margin on price, calculate the variance between the selling price and production cost, then divide that result by the product's price:

Margin=(2-1)/2

Margin=1/2

Margin=0.5 → 50%

Thus, the margin on price calculates to 50%.

Response:

Lonnie Holdiman Co.

A Schedule calculating the adjusted income prior to taxes for 2020 and 2021:

2020 2021

Income before taxes $101,000 $77,400

1. Excess Sales revenue (38,200) 38,200

2. Inventory understated as of December 31, 2020 8,640 (8,640)

3. Discount on amortized bonds not accounted for (1,776) (1,901)

4. Equipment repairs not accounted for (8,500) (9,400)

5. Overstated depreciation from capitalized equipment repairs 850 940

Corrected income before tax $62,014 $96,599

Clarification:

a) Data and Calculations:

Income before tax for 2020 = $101,000

Income before tax for 2021 = $77,400

1. Sales Revenue 2020 $38,200; 2021 Sales Revenue $38,200

2. Understated inventory for 2020 $8,640; 2021 $8,640

3. Unrecorded interest expense on bonds for 2020 $1,776

Interest expense on bonds for 2021 $1,901

4. Unrecorded equipment repairs 2020 $8,500 falsely recorded to Equipment account $8,500

Equipment repairs 2021 $9,400 misclassified to Equipment account $9,400

5. Overstated depreciation expense for 2020 $850

Overstated depreciation expense for 2021 $940.

Bond Calculations:

Outstanding bond value:

Face value of the bond = $250,000

Discount = 15,000

Bond proceeds = $235,000

Bond interest payment = $15,000 ($250,000 * 6%)

Bond interest expense = $16,450 ($235,000 * 7%)

Amortized discount = $1,450

On December 31, 2017:

Bond interest payment = $15,000 ($250,000 * 6%)

Bond interest expense = $16,450 ($235,000 * 7%)

Amortized discount = $1,450 ($16,450 - $15,000)

Outstanding value = $236,450 ($235,000 + 1,450)

On December 31, 2018:

Bond interest payment = $15,000 ($250,000 * 6%)

Bond interest expense = $16,552 ($236,450 * 7%)

Amortized discount = $1,552 ($16,552 - $15,000)

Outstanding value = $238,002 ($236,450 + 1,552)

On December 31, 2019:

Bond interest payment = $15,000 ($250,000 * 6%)

Bond interest expense = $16,660 ($238,002 * 7%)

Amortized discount = $1,660 ($16,660 - $15,000)

Outstanding value = $239,662 ($238,002 + 1,660)

On December 31, 2020:

Bond interest payment = $15,000 ($250,000 * 6%)

Bond interest expense = $16,776 ($239,662 * 7%)

Amortized discount = $1,776 ($16,776 - $15,000)

Outstanding value = $241,438 ($239,662 + 1,776)

On December 31, 2021:

Bond interest payment = $15,000 ($250,000 * 6%)

Bond interest expense = $16,901 ($241,438 * 7%)

Amortized discount = $1,901 ($16,901 - $15,000)

Outstanding value = $243,339 ($241,438 + 1,901)

Depreciation on Capitalized Equipment Repairs:

Excess depreciation expense:

For 2020 = $850 ($8,500 * 10%)

For 2021 = $940 ($9,400 * 10%)

Answer:

In a non-monetary exchange that lacks commercial substance, a company should note the acquired asset using the same book value as that of the asset it exchanged.

ABC's journal entry:

Dr Cash 25,000

Dr Building - new 75,000

Dr Accumulated depreciation building - old 60,000

    Cr Building - old 150,000

    Cr Gain on the exchange 10,000*

As the cash received is less than 25% of the total value in the exchange, only a partial gain attributable to the cash must be acknowledged. The partial gain is derived by deducting the cash received from the asset's fair market value. Here, the fair market value was $100,000 with a carrying value of $90,000, leading to a recognized gain of $100,000 - $90,000 = $10,000. Consequently, the new carrying value needs to be adjusted to align with the fair market value minus cash received ($100,000 - $25,000 = $75,000).

XYZ's journal entry:

Dr Building - new 105,000

Dr Accumulated depreciation building - old 15,000

    Cr Building - old 95,000

    Cr Cash 25,000

Considering the absence of commercial substance in the transaction and that XYZ did not receive cash, it must register the new building's value by combining the old building's carrying value with the cash paid to ABC (=$80,000 + $25,000=$105,000).

Answer: The correct option is B

Explanation:

The ethical guidelines established by a professional organization dictate the acceptable behavior for practitioners in their respective fields. Moreover, these guidelines outline penalties for any professional who violates the established codes of practice. Professionals must act impartially, maintain a high standard of honesty, and avoid misrepresenting information during their duties.

Certified Public Accountants (CPAs) are tasked with providing clients with expert financial counsel, preparing their tax submissions, and assisting them with tax filings to the relevant authorities (IRS). In this scenario, since Breslin has chosen not to reveal certain information, Martina is obligated to end their professional relationship and report Breslin to the IRS professional responsibility office. This way, if the IRS later determines that Breslin Baked Good has underpaid taxes, Martina is protected as she has notified the IRS about the issue, safeguarding herself from being implicated in the wrongdoing.