1. (TCO B) The Accent Corporation shows

1. (TCO B) The Accent Corporation shows the following information. On January 1, 2012, Accent purchased a donut machine for $600,000. A) Pretax financial income is $3,200,000 in 2012 and $3,500,000 in 2013.B) Taxable income is expected in future years with an expected tax rate of 40%.C) The company recognized an extraordinary gain of $200,000 in 2013 (which is fully taxable).D) Tax-exempt municipal bonds yielded interest of $240,000 in 2013.E) Straight-line basis for 6 years for financial reporting (See Appendix 11A.)F) Half-year convention basis depreciation for 4 years for tax purposesRequired: 1) Compute taxable income and income taxes payable for 2013.2) Prepare the journal entries for income tax expense, income taxes payable, and deferred taxes for 2013.3) Prepare the deferred income taxes presentation for December 31, 2013 balance sheet. (Points : 40) (TCO D) Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms: 1) The normal selling price of the equipment is $350,000 and the cost of the asset to Absolute Leasing Inc. was $275,000. 2) At the end of the lease, the equipment will revert to Absolute Leasing, Inc. and have an unguaranteed residual value of $25,000. Their implicit interest rate is 10%. 3) The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life). 4) Absolute Leasing, Inc. incurred costs of $5,000 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. 5) The lease begins on January 1, 2012 and payments will be in equal annual installments. 6) Allen will pay all maintenance, insurance, and tax costs directly and annual payments of $55,000 on January 1 of each year. Required: a) Determine what type of lease this would be for the lessee and calculate the initial obligation. b) Prepare Allen, Inc.?s amortization schedule for the lease terms. c) Prepare all the journal entries for Allen, Inc. for 2012. Assume a calendar year fiscal year. (Points : 40) (TCO F) Cash flows from operating activities (indirect and direct methods). Presented below is the income statement of Angola, Inc. Sales $324,000 Cost of goods sold $214,000 Gross profit $110,000 Operating expenses $67,000 Income before income taxes $43,000 Income taxes $17,200 Net income $25,800 In addition, the following information related to net changes in working capital is presented. Cash $10,600 Debit Accounts receivable $2,400 DebitInventories $3,600 DebitSalaries payable (operating expenses) $12,000 Credit Accounts payable $15,000 Credit Income taxes payable $1,400 CreditDepreciation expense for the year was $14,700 Deferred tax liability account increased $1,800Required: Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows -(a) using the indirect method. -(b) using the direct method. (Points : 40) 4. (TCO G) Selected financial ratios. The following information pertains to Allbright, Inc. Cash $53,000 Accounts receivable $186,000Inventory $82,000Plant assets (net) $320,000Total assets $641,000 Accounts payable $85,000 Accrued taxes and expenses payable $12,000Long-term debt $365,000Common stock ($10 par) $120,000Paid-in capital in excess of par $6,000Retained earnings $150,000Total equities $641,000 Net sales (all on credit) $980,000 Cost of goods sold $760,000 General & Admin Expenses $160,000 Net income $60,000 Required Compute the following: (It is not necessary to use averages for any balance sheet figures involved.) (a) Current ratio(b) Inventory turnover(c) Receivables turnover(d) Book value per share(e) Earnings per share(f) Debt to total assets(g) Profit margin on sales(h) Return on common stock equity (Points : 405. (TCO E) Discuss the three approaches for reporting changes in accounting principles. Include additional points about how these approaches may be impacted by the adoption of new IFRS standards. (Points : 40)

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