intermedidate accounting assignment
I Assignment 2- Spring ‘20 ACCT 300B Due by 1:00 pm (Pacific Time) on April 27, 2020 Please turn in your completed assignments by email. 50 points will be deducted for each day the project is late. Part 1 CPA Examination Process Please use the AICPA “Candidate Bulletin” posted on Beachboard to answer the following questions: 1. What are Task-Based Simulations? 2. What four months have a shortened testing period (in other words, you can’t take the exam every day of these months)? 3. Will you be able to bring your favorite calculator with you into the testing room? 4. What is the lowest passing score on each section of the exam? 5. Can you take the same section more than once in the same testing window? 6. What are Pretest Items? 7. How many hours is each section of the exam? 8. What are the four sections of the CPA exam? 9. On which section of the exam are there three written responses tasks? 10. How many “testlets” are on each section of the exam? 11. After which testlet will you be offered a standard 15-minute break where the test clock stops? (testlet # ?) 12. If you choose to take a break between testlets outside of the standard 15-minute break, will the test clock continue to run? 13. Please place the correct number ( 1 – 7) next to each step to indicate the sequence of these events, as indicated in the candidate bulletin (Place a “1” next to the 1st step, etc.) Take Your Examination(s) Receive Your Notice To Schedule Apply to Take the Examination Receive Your Score Report(s) Schedule Your Examination Complete Payment of Examination Fees Review the Tutorial and Sample Tests Part 2: Chapter 22 and 23 Practice Problems Gamma purchased a machine for $300 on January 1, 2012. It assumed the machine would be functional for five years with a salvage value of $50. At the beginning of 2015, Gamma estimates that there are five years of useful life remaining for the machine and a salvage value of $20. The company uses straight-line depreciation. 14) What is the book value of the machine when they make the changes? 15)What amount of depreciation should Gamma record in 2015? Delta bought equipment on 1/1/15 at a cost of $105. The equipment has a useful life of 7 years and no salvage value. The full cost of the equipment was mistakenly expensed immediately as repairs and maintenance expense. 16) Assume the error was discovered on 1/1/17. Because of the error, is retained earnings on 1/1/17 correct or incorrect? (if incorrect, is it too high or too low and by what amount?) 17)Now assume, instead, that the error was caught on 1/1/18. Because of the error, are total assets on 1/1/18 correct or incorrect? (if incorrect, are they too high or too low and by what amount?) 18)Now assume that the error is not discovered until 1/1/24, are R.E. and total assets correct or incorrect on 1/1/24? (if incorrect, are they too high or too low and by what amount?) Sigma's comparative financial statements included the following amounts for the current year: Depreciation expense $102 Loss on sale of fixed assets 26 Decrease in fixed assets 155 Increase in accounts receivable 52 Decrease in accounts payable 42 Decrease in inventory 65 Increase in taxes payable 19 Net income 720 19) How much are Sigma’s net cash flows from operating activities? Delta’s financial statements included the following amounts for the current year: Retired (paid off) bonds $52 Purchased inventory 20 Dividends received 11 Acquired production machinery 59 Issued common stock 20 20) Based on this information, what is the amount of net cash flows from financing activities? In 2020, Gamma sold used equipment for $13. The equipment had an original cost of $80 and accumulated depreciation as of the date of sale was $60. It also purchased held-for-maturity securities for $7. Net income for the year was $66 after deducting $8 in depreciation expense. There were no other transactions conducted during the period. 21) How much are the 2020 cash flows from operating activities for Gamma? 22) How much are the 2020 cash flows from investing activities for Gamma? PART 3 1)Beta purchased an insurance policy on 1/1/15 and paid a five-year premium for $100. The full purchase price was recorded immediately as Insurance Expense. The error was discovered on 1/1/18. Prepare the J.E. that would correct assets and retained earnings as of 1/1/18. 2)In March, 2018, Gamma sold Available-for-Sale securities for $75. It had originally purchased these securities for $45. By mistake, Gamma debited cash and credited investments for $75 at the time of sale. The error was caught the following day (before books closed). Prepare the J.E. that would correct this error without having to reverse the original journal entry. 3)Beta discovered ending inventory errors in 2015 and 2016. The 2015 ending inventory was overstated by $180 whereas the 2016 ending inventory was understated by $35. Ignoring taxes, by what amount should the beginning retained earnings be adjusted on January 1, 2017? 4) Using the same information in the previous problem, now assume that, in addition to the previously described inventory errors, depreciation expense was understated by 10 in 2015 and overstated by 25 in 2016. By what amount should beginning R.E. balance be adjusted on 1/1/17? 5) In 2015, Epsilon incorrectly recorded ending inventory as $500 instead of the correct number of $300 (overstatement error). The error was discovered on 1/1/16. Tax rates for all years is 40%. To correct this error, by what amount, and in which direction (increase or decrease) should R.E. be adjusted on 1/1/16? 6)On December 31, 2010, Delta changed its inventory valuation method from the weighted average method to LIFO for financial statement purposes. As of that date, if Delta had always been using the LIFO method, its COGS (for all years combined) would have been $150 lower. The tax rate is (and always has been) 30%. By what amount, and in which direction (increase or decrease), should R.E. be adjusted on January 1, 2011, to reflect this change to LIFO: 7)Beta purchased a machine on January 1, year 1, for $600. On the date of acquisition, the machine had an estimated useful life of six years with no salvage value. The machine was being depreciated on a straight-line basis. On January 1, year 4, Beta determined that the machine had an estimated life of eight years from the date of acquisition and a salvage value of $40.What is the amount of the depreciation expense that should be recorded at the end of year 4? 8)Energy, Inc began operations in 2015 using the LIFO inventory method. At the beginning of 2016, it switches to FIFO. The beginning inventory for 2016 using LIFO was $80. Under the FIFO method, the beginning inventory is $100. What adjustment to retained earnings on 1/1/16 is necessary to reflect this change in inventory method? (ignore taxes). 9) Bob purchased shares of Delta for 60 on December 22, 2013. The fair value of these securities on December 31, 2013 was 54. Prepare the journal entries for Bob to show the purchase of the securities, and the adjustment of the securities to fair value at 12/31/13. 10) On January 3, 2014, Bob sold the securities for $65. Prepare the journal entries for the sale and the removal of the investment from the books. Investor acquired 40% of the voting common shares of Investee on January 1, 2019, at a total cost of $250. At the end of 2019, Investee reported $80 in net income and declared and paid $50 in total dividends to all shareholders for the period. At the end of 2020, Investee reported a net loss of $40. No dividends were declared in 2020. 11) What is the journal entry to record the purchase of this investment? 12) On Investor’s balance sheet, what is the carrying value of the investment in Investee at December 31, 2019? 13) On Investor’s balance sheet, what is the carrying value of the investment in Investee at December 31, 2020? 14) How should the revenue be allocated between the two items (soda and potato chips) when a customer, using the discount, buys both items for $12? 15) Which of the following describes a benefit plan for employees where the benefit/payments to (retired) employees are determined by the plan, employer contribution varies (determined by actuaries),and the risk is borne by the employer in that it must make sure that enough plan assets are allocated to cover eventual pension obligations? 16) 401(k) plans and 403b plans are examples of which type of plan? 17) Consider the VBO, ABO, and PBO as they relate to pension plans. List them in order of their dollar value, with the largest one first, the middle one second, and the smallest of the three last 18) Gamma had previously recorded a deferred tax asset of $400 due to a temporary difference due to warranty liabilities ($1000 × 40%). It now believes it is more likely than not that it will not realize 30% of the deferred tax asset. What is the necessary J.E. to record the valuation allowance adjustment? 19) Gamma reported sales of $5,000 in 2019 and no permanent book-tax income differences. It also recorded an estimated product warranty liability and the related warranty expense of $1,100 for book purposes. There were no additional expenses in 2019. Under tax law, Gamma cannot deduct the estimated warranty expense until it actually provides the services by repairing the product (pays for repairs). The company’s tax rate is 40%. What is the JE for I.T. expense for 2019? 20) Continuing the previous example, assume that Gamma made actual warranty repairs at a total cost of $1,100 in 2020. It also reported $3,000 in sales revenue and no additional expenses for the year. Tax rate is 40%. No other book/tax differences. What is the JE for I.T. expense for 2020? 21) Delta began business in 2015 and reported a $100,000 Net Operating Loss (NOL) for the current year. It has no permanent or temporary differences; thus, its taxable loss equals its book loss of $100,000. Delta will carry forward its $100,000 NOL to future years. The tax rate is 40%. What is the JE for 2015 I.T. Expense? 22) How much is 2015 Net Income? 23) Using the information from above, now assume that, in 2016, Delta decides to apply (use up) the DTA (carryforward). The company has book income of $200,000. No book/tax differences. So, Delta reports taxable income of $200,000 before considering the effect of its NOL. What is the 2016