Log in
Accounting
1
answer
0
watching
153
views

Ameen Company had the following balance sheet as of December 31,2014.

Ameen Company
Statement of Financial Position
December 31, 2014
(amounts are in millions)

Cash 0 Deferred Tax Liability 4
Building 36 TotalLiability 4
Less: Accumulated Depreciation (6)
BookValue 30 CommonStock 10
TotalAssets 30 RetainedEarnings 16
Total Shareholder's Equity 26

During 2015, Ameen had cash sales of $47 million
Ameen Company had previously purchased a building for $36 million.Ameen uses straight-line depreciation for financial statementreporting and MACRS for income tax reporting. At December 31, 2014,the carrying value of the building was $30 million and its taxbasis was $20 million. At December 31, 2015, the carrying value ofthe building was $28 million and its tax basis was $13 million. Thetax rate is 40%. There were no other temporary differences and nopermanent differences.

Required:
1. Provide the following journal entries

a. Recognize the sales


b. Recognize the depreciation expense


c. Recognize the tax accrual


d. Provide the supporting document to justify the tax accrual:

Item Amount
Pretax Financial Income
Temporary Difference
Taxable Income
Taxes Payable

e. Provide the statement of financial position for December 31,2015.

Watch
1
answer
0
watching
153
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Lelia Lubowitz
Lelia LubowitzLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

3. Following are financial statements for Moore Companyand Kirby Company for 2015.

Moore Kirby
Sales (720,000) (540,000)
Cost of goodssold 450,000 360,000
Operating and interestexpense 90,000 138,000
Netincome (180,000) (42,000)

Retained earnings,1/1/15 (891,000) (495,000)
Netincome (180,000) (42,000)
Dividendspaid 117,000 6,000
Retained earnings,12/31/15 (954,000) (531,000)

Cash andreceivables 195,300 162,000
Inventory 201,600 144,000
Investment inKirby 591,300 -
Equipment(net) 540,000 378,000
Buildings 900,000 585,000
Accumulated depreciation-buildings (90,000) (180,000)
otherassets 180,000 90,000
Totalassets 2,518,200 1,179,000
Liabilities (1,024,200) (513,000)
common stock (180,000) (36,000)
Additional paid-incapital (360,000) (99,000)
Retained earnings,12/31/15 (954,000) (531,000)
Total liabilities andequity (2,518,200) (1,179,000)

Moore purchased 90% of Kirby on January 1, 2014, for $585,000 incash. On that date, the 10% noncontrolling interest was assessed tohave a $65,000 fair value. As of January 1, 2014, Kirby had commonstock $36,000, additional paid-in capital 99,000, and retainedearnings $423,000. Also at the acquisition date, Kirby heldequipment (4-year remaining life) whose fair value is higher thanthe book value by $18,000, and an interest-bearing liability(5-year remaining life) whose fair value is lower than book valueby $36,000. The rest of the excess fair value was assigned togoodwill.

Moore uses the initial value method to account for theinvestment in Kirby.

During 2014, Kirby earned a net income of $72,000 and paid nodividends.

Each year, Kirby sells inventory to Moore with a gross profitrate of 20%. Intra-entity sales were $144,000 in 2014 and $180,000in 2015. On December 31, 2014, 30% of the 2014 transfers were stillon hand and, on December 31, 2015, 40% of the 2015 transfersremained.

Moore sold a building to Kirby on January 2, 2014. It hadoriginally cost Moore $100,000 but had $86,000 in accumulateddepreciation at the time of this transfer. The sale price was$26,000 in cash. At that time, the building has a five-yearremaining life.

Required: Prepare consolidation entries for December 31,2015

The comparative balance sheets for 2016 and 2015 and thestatement of income for 2016 are given below for NationalIntercable Company. Additional information from NIC’s accountingrecords is provided also.

NATIONAL INTERCABLE COMPANY
Comparative Balance Sheets
December 31, 2016 and 2015
($ in millions)
2016 2015
Assets
Cash $ 127 $ 80
Accounts receivable 237 230
Prepaid insurance 9 14
Inventory 218 210
Long-term investment 38 60
Land 200 200
Buildings and equipment 284 240
Less: Accumulateddepreciation (91) (70)
Trademark 38 40
$ 1,060 $ 1,004
Liabilities
Accounts payable $ 35 $ 48
Salaries payable 5 8
Deferred income tax liability 16 14
Lease liability 80 0
Bonds payable 130 270
Less: Discount on bonds (21) (24)
Shareholders' Equity
Common stock 280 240
Paid-in capital—excess of par 100 70
Preferred stock 60 0
Retained earnings 375 378
$ 1,060 $ 1,004

NATIONAL INTERCABLE COMPANY
Income Statement
For Year Ended December 31, 2016
($ in millions)
Revenues
Sales revenue $ 330
Investment revenue 13
Gain on sale of investments 4 $ 347
Expenses
Cost of goods sold 140
Salaries expense 56
Depreciation expense 30
Trademark amortization expense 2
Insurance expense 18
Bond interest expense 40
Loss on building fire 24 310
Income before tax 37
Income tax expense 24
Net income $ 13

Additional information from the accounting records:
a.

Investment revenue includes National Intercable Company's $6million share of the net income of Central Fiber OpticsCorporation, an equity method investee.
b.

A long-term investment in bonds, originally purchased for $28million, was sold for $32 million.
c.

Pretax accounting income exceeded taxable income causing thedeferred income tax liability to increase by $2 million.
d.

A building that originally cost $36 million, and which wasone-fourth depreciated, was destroyed by fire. Some undamaged partswere sold for $3 million.
e.

The right to use a building was acquired with a seven-year leaseagreement; present value of lease payments, $80 million.
f. $140 million ofbonds were retired at maturity.
g.

$40 million par value of common stock was sold for $70 million,and $60 million of preferred stock was sold at par.
h. Shareholderswere paid cash dividends of $16 million.

Required:
2.

Prepare the statement of cash flows. (Enter your answersin millions (i.e., 10,000,000 should be entered as 10.). Amounts tobe deducted should be indicated with a minus sign.)

he comparative balance sheets for 2016 and 2015 and the incomestatement for 2016 are given below for Arduous Company. Additionalinformation from Arduous’s accounting records is provided also.

ARDUOUS COMPANY
Comparative Balance Sheets
December 31, 2016 and 2015
($ in millions)
2016 2015
Assets
Cash $ 154 $ 100
Accountsreceivable 209 232
Investment revenuereceivable 25 23
Inventory 226 219
Prepaidinsurance 23 32
Long-terminvestment 213 144
Land 234 169
Buildings andequipment 431 438
Less: Accumulateddepreciation (117) (158)
Patent 53 56
$ 1,451 $ 1,255
Liabilities
Accountspayable $ 69 $ 103
Salariespayable 25 37
Bond interestpayable 27 23
Income taxpayable 31 38
Deferred income taxliability 49 27
Notes payable 32 0
Lease liability 101 0
Bonds payable 234 313
Less: Discount onbonds (41) (46)
Shareholders’ Equity
Common stock 465 429
Paid-incapital—excess of par 119 104
Preferred stock 94 0
Retainedearnings 274 227
Less: Treasury stock (28) 0
$ 1,451 $ 1,255

ARDUOUS COMPANY
Income Statement
For Year Ended December 31, 2016
($ in millions)
Revenues
Sales revenue $ 589
Investmentrevenue 30
Gain on sale oftreasury bills 2 $ 621
Expenses andloss:
Cost of goodssold 199
Salariesexpense 92
Depreciationexpense 13
Patent amortizationexpense 2
Insuranceexpense 26
Bond interestexpense 47
Loss on machinedamage 34
Income taxexpense 55 468
Netincome $ 153

Additionalinformation from the accounting records:
a.

Investment revenue includes Arduous Company’s $25 million shareof the net income of Demur Company, an equity method investee.
b.

Treasury bills were sold during 2016 at a gain of $2 million.Arduous Company classifies its investments in Treasury bills ascash equivalents.
c.

A machine originally costing $108 million that was one-halfdepreciated was rendered unusable by a flood. Most major componentsof the machine were unharmed and were sold for $20 million.
d.

Temporary differences between pretax accounting income andtaxable income caused the deferred income tax liability to increaseby $22 million.
e.

The preferred stock of Tory Corporation was purchased for $44million as a long-term investment.
f.

Land costing $65 million was acquired by issuing $33 millioncash and a 10%, four-year, $32 million note payable to theseller.
g.

The right to use a building was acquired with a 15-year leaseagreement; present value of lease payments, $101 million.
h. $79 million of bonds wereretired at maturity.
i.

In February, Arduous issued a 4% stock dividend (6 millionshares). The market price of the $6 par value common stock was$8.50 per share at that time. Also the company paid a cashdividend.
j. In April, 1 million shares ofcommon stock were repurchased as treasury stock at a cost of $28.00million.

Required:

Prepare the statement of cash flows of Arduous Company for theyear ended December 31, 2016. Present cash flows from operatingactivities by the direct method. (Do not round yourintermediate calculations. Enter your answers in millions (i.e.,10,000,000 should be entered as 10.). Amounts to be deducted shouldbe indicated with a minus sign.)

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in