1. (TCO B) At the beginning of 2012, Barbara, Inc….

1. (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 $25,000 Accrued warranty costs, estimated to be used in 2013 $74,000 Prepaid rent expense, will be used in 2013 $16,000 Installment sales revenue, to be collected in 2013 $45,000 Operating loss carryforward $36,000 Deferred 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 $85,000 Interest on projected benefit obligation $52,000 Interest on vested benefits $28,000 Amortization of prior service cost due to increase in benefits $15,000 Expected return on plan assets $56,000 The 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 $150,000 Contributions to the plan $120,000 Actual return on plan assets $130,000 Projected benefit obligation (beginning of year) $1,800,000 Fair value of plan assets (beginning of year) $1,650,000 The 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 decrease Prepaid Expenses $4,500 decrease Inventory $26,400 increase Accrued Liabilities $2,300 decrease Accounts Payable $3,800 increase Compute the net cash from operating activities based on the above information. (Points : 5) $501,100 $453,900 $519,200 $478,700 5. (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 assets A $102,000 $37,200 $67,200 B $126,000 $(19,200) $98,400 C $300,000 $134,400 $768,000 D $24,000 $4,800 $42,000 Required: For which of the segments would information have to be disclosed in accordance with professional pronouncements? (Points : 5) Segments A, B, C, and D Segments A, B, and C Segments A and B Segments 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 Return 2012 Income before temporary difference $1,800,000 $1,800,000 Temporary difference $750,000 $250,000 Income $2,550,000 $2,050,000 2013 Income before temporary difference $1,500,000 $1,500,000 Temporary difference $- $250,000 Income $1,500,000 $1,750,000 2014 Income before temporary difference $1,250,000 $1,250,000 Temporary difference $- $250,000 Income $1,250,000 $1,500,000 Required: 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 Receivable Sales Price Cost of Sales b) 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 Company COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2013 AND 2012 2013 2012 Cash $ 364,000 $ 322,000 Receivables $ 218,400 $ 168,000 Inventory $ 252,000 $ 308,000 Plant assets $ 224,000 $ 189,000 Accumulated depreciation $ (112,000) $ (106,400) Long-term investments (held-to-maturity) $ 112,000 $ 130,200 $ 1,058,400 $ 1,010,800 Accounts payable $ 189,000 $ 170,800 Accrued liabilities $ 42,000 $ 46,340 Bonds payable $ 189,000 $ 232,400 Common stock $ 252,000 $ 231,000 Retained earnings $ 386,400 $ 330,260 $ 1,058,400 $ 1,010,800 Beautiful Beadwork Company INCOME STATEMENT For the year ended December 31, 2013 Sales 1,050,000 Cost of Goods Sold 742,000 Gross Margin 308,000 Selling and administrative expenses 148,400 Income from Operations 159,600 Other revenues and gains Gain on sale of investments 9,800 Income before tax 169,400 Income tax expense 67,760 Net Income 101,640 Additional 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)