Intermediate Accounting III Online Midterm Exam Name Tracker
Coverintermediate Accounting Iii Onlinemidterm Examnametraci Miller
Present Value of Minimum Lease Payments Lease Determination Lease Entries Accounting for Leases Income Tax Accounting Operating Loss Carryforward/back Compensated Absences Payroll Journal Entries Pension Worksheet Weighted # Shares Outstanding Basic & Diluted EPS 20 Total ,2,. A lease involves payments of $1,000 per month for two years. The payments are made at the end of each month. The lease also involves a guaranteed residual value of $10,000 to be paid at the end of the 2-year period. The appropriate interest rate is 12% compounded monthly. Compute the present value of the minimum lease payments. Show your work: 2. The lessor leased equipment to the lessee. The fair value of the equipment is $246,000. Lease payments are $35,000 per year, payable at the end of the year, for 10 years. The interest rate implicit in the lease is 9%. At the end of 10 years, the lessor will repossess the equipment. The lease does not include a bargain purchase option, and the equipment has a total estimated useful life of 15 years. Is the lease an operating lease or a capital lease? Explain. Determination (show your work) Explanation: 3. On January 1, the lessee company signed an operating lease contract. The lease contract calls for $3,000 payments at the end of each year for 10 years. The rate implicit in the lease is 10%. Make the journal entries or memorandum necessary on the books of the lessee company (1) on the lease-signing date and (2) to record the first payment. 1 - Lease signing date 2 - Record the first payment . Pursuit Company leased a machine on July 1, 2014, under a 10-year lease. The economic life of the machine is estimated to be 15 years. Title to the machine passes to Pursuit at the expiration of the lease, and thus, the lease is a capital lease. The lease payments at $97,000 per year, including executory costs of $3,000 per year, all payable in advance annually. The incremental borrowing rate of the company is 9%, and the lessor's implicit interest rate is unknown. Pursuit Company uses the straight-line method of amortization and the calendar year for reporting purposes. Required: Give all entries on the books of the lessee relating to the lease for 2008. For your convenience, descriptions are provided. Date Account Description Debit Credit 7/1/14 Dr. Leased Equipment 657,549 Cr. Obligations under Capital Leases 657,549 To record lease 7/1/14 Dr. Lease Expense 3,000 Dr. Obligations under Capital Leases 94,000 Cr. Cash 97,000 To record first lease payment 12/31/14 Dr. Interest Expense 25,360 Cr. Capital Leases 25,360 To accrue interest payable on capital lease at end of year Dr. Amortization Expense on Leased Equipment 21,919 Cr. Leased Equipment 21,919 To record amortization of the leased asset. 12/31/14 Dr. Prepaid Lease Expense 1,500 Remember, half of a year (July - December) Cr. Lease Expense 1,500 To record the prepaid executory costs . Talbert, Inc. computed pretax financial income of $40,000 for the first year of its operations ended December 31, 2014. Included in financial income was $25,000 of nondeductible expenses, $22,000 gross profit on installment sales that was deferred for tax purposes until the installments were collected, and $18,000 in bad debt expense that had been accrued on the books in 2008. The temporary differences are expected to reverse in the following patterns: Year Gross Profit on Collections Bad Debt Write-Offs ,,,,,, Total 22,,000 The enacted tax rates for this year and the next four years are as follows % % % % % Assume that there will be sufficient income in each future year to realize any deductible amounts. For classification purposes, the bad debt write-offs are considered to be associated with a current asset, and the receivable for installment sales is classified as both current and noncurrent, depending on the expected timing of the receipt. REQUIRED: A) Complete the chart below. B) Prepare the journal entries necessary to record income taxes for 2014. A) Enacted Deductible Asset Taxable Liability Rate Amount Valuation Amount Valuation % 6,,,,% 12,,,,% 4,,% 6,,,,,,110 B) Account Description Debit Credit Dr. Income tax expense 24,400 Cr. income tax payable 24,400 To record income taxes payable Dr. Deferred tax asset-current 5,940 Dr. income tax expense 1,170 Cr. Deferred tax liability- current 1,750 Cr. Deferred tax liability- non current 5,360 To account for deferred items . The following information is taken from the financial statements of Neptune Enterprises: Taxable and Pretax Income Income Year Financial Income Tax Rate Tax Paid ,% 12,,% 10,,% 13,,% 7,,% - 0 Required: A) Given the information above, compute the amount of income tax refund due as a result of the operating loss in 2014. (use the following chart) Amount of Loss Amount of Refund Due from Year Applied to Income Income Tax Rate Prior Years Income Taxes B) What is the amount, if any, of the operating loss carryforward? . Young Fashions, Inc's employees are paid on the 6th and 22nd of each month for the period ending the last day of the previous moth and the 15rh of the current month, respectively. An analysis of the payroll on Monday, October 6, 2014 revealed the following data: Gross Federal State Pay FICA Income Tax Income Tax Insurance Net Pay Office staff salaries 15,,,380 Officer salaries 31,,,,914 Sales salaries 20,,,796 Totals 66,,,,,,090 It is determined that for the September 30 pay period, no additional employees exceeded the wage base for FICA purposes than had done so in prior pay periods. All of the officer salaries, 75% of the office staff salaries, and 40% of the sales salaries for the payroll period ending September 30 were paid to employees who had exceeded the wage base for unemployment taxes. Assume the unemployment tax rates in force are as follows: federal unemployment tax, .08%, state unemployment tax, 5.4% Prepare the adjusting entries that would be required at September 30, the end of Young Fashions's fiscal year, to reflect the accrual of the payroll and any related payroll taxes. Separate salaries and payroll tax expense accounts are used for each of the three employee categories: office staff, officer, and sales salaries. The schedule of employer's payroll taxes can assist you (complete the shaded cells). Don't forget the limits for unemployment taxes Total FICA FUTA SUTA Office Staff Salaries: FICA (given) - 0 FUTA (calculate) - 0 SUTA (calculate) - Officer Salaries FICA (given) - 0 FUTA (calculate) - 0 SUTA (calculate) - Sales Salaries FICA (given) - 0 FUTA (calculate) - 0 SUTA (calculate) - Total taxes - Record the journal entries: Account Description Debit Credit . During Year 1 (the first year of the company's existence), employees of the company earned vacation days as follows: Average Wage Vacations Days Vacation Days Employee Per Day Earned this Year Taken this Year 1 $ $ $ Required: A) Make the journal entry necessary at the end of Year 1 to record the unused vacation days earned during the year. Account Description Debit Credit B) Make the journal entry necessary in Year 2 to record the use of all of these vacation days. Assume that all employees received at 10% pay raise in Year 2. Account Description Debit Credit . On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. Unrecognized prior service cost was $2,000; it was being amortized on a straight-line basis over the 5-year average remaining life of the affected employees. The balance in the unrecognized (or deferred) pension gain was $700. The following information relates to the pension plan during the year: Service cost 1,200 Actual return on the pension fund 1,550 Benefits paid to retirees 300 Contribution to the pension fund 1,050 Discount rate for PBO 8% Expected return on pension fund 11% Enter all of the pension information, including the beginning balances, in a pension worksheet. Use the worksheet to display the computation of pension expense for the year as well as the ending balances for all pension related items. Company Pension Worksheet for 2014 Formal Accounts Memorandum Accounts Prepaid/ Periodic Fair Unrecog- Unrecog- Net Accrued Pension Projected Value of nized Net nized Prior Pension Pension Cost Benefit Pension Pension Service Expense Cash Cost Items Obligation Items Gain/Loss Cost Balance, January 1 (a) Service Cost (b) Interest Cost (c) Actual Return on Assets (d) Benefits Paid (e) Deferred Gain (f) Amortization of PSC Summary Journal Entries (1) Annual Pension Expense Accrual (2) Annual Pension Contribution Balance, December . Transactions involving the common stock of Par-More Company during the 2-year period 2008 and 2009 were as follows: 2013 Jan 1 Had a balance of 200,000 shares of $10 par common stock Apr 1 Converted $2,500,000 of convertible bonds with 50 shares issued for each $1,000 bond. July 1 Declared a 10% stock dividend Oct 1 Employees exercised options to purchase 7,000 shares for $20 a share 2014 Apr 1 Declared a 2-for-1 stock split Oct 1 Sold 170,000 shares for $30 a share From the information given, compute the comparative number of weighted-average shares outstanding for 2013 and 2014 to be used for basic EPS computations at the end of 2009. Weighted average shares - 2013 Weighted average shares - 2014 Show your work: . Marcina Shoes reports long-term liabilities and stockholders' equity balances at December 31, 2014, as follows: Convertible 5% bonds (par) $ 800,000 Common stock, $25 par, 100,000 shares issued and outstanding $ 2,500,000 Additional information is determined as follows: Conversion term of bonds - 50 shares for each $1,000 bond Income before extraordinary items - 2014 $ 199,800 Extraordinary gain (net of tax) $ 43,520 Net income - 2014 $ 243,320 Required: Compute the basic and diluted EPS for the company for 2014 (using the schedule below), assuming that the income tax rate is 30%. No changes occurred in the debt and equity balances during 2014. BASIC EPS Income before extraordinary gain Show per share Extraordinary gain Show per share Net income $ - 0 Show per share DILUTED EPS (in dollars) Income before extraordinary gain Add interest on convertible bonds, net of taxes Interest Less income taxes at 30% $ - 0 Adjusted income before extraordinary gain $ - 0 Actual number of shares outstanding Additional shares assumed issued on conversion Total shares for computing diluted EPS - 0 Diluted EPS (in PER SHARE) Income before extraordinary gain Show per share Extraordinary gain Show per share Net Income $ - 0 Show per share HealthCare Setting - Worksheet Choose one healthcare setting from the list in the box that best fits each of the five patients in the following health care cases. Write your selection in the answer box provided and then explain your decision. Give your rationale for why the health care setting you chose is the best fit for the patient, given the patient’s health status and the type of care they are requiring. (The space expands as you write, if needed.) Possible Healthcare Settings · Skilled nursing facility · Acute care hospital · Hospice · Ambulatory Surgery Center · Behavioral health center · Home health care Case Studies of Patients 1. Tony is a 59-year-old man who has terminal cancer. He has received all of the curative treatment that is possible. His constant pain can be relieved only to a certain extent by pain medication. He requires other minimal care but needs assistance with bathing and dressing. His physician expects him to live only a few months. What health care setting is appropriate for this patient? Choice of Health Care Setting Explain Your Choice (Why does your chosen health care setting best fit your patient's needs? Please give as much detail as possible.) 2. Fran is a 72-year-old Medicare patient who is recovering from a hip replacement operation after a fall. She is a widow, who is moderately senile, and also has chronic renal disease. Her physician is recommending continuous professional care and specialized rehabilitative services. What health care setting is appropriate for this patient? Choice of Health Care Setting Explain Your Choice (Why does your chosen health care setting best fit your patient's needs? Please give as much detail as possible.) 3. Mildred is an 81-year-old patient who has just been discharged from an acute care hospital after a stroke that resulted in speech impairment. She is able to take care of her needs adequately at home, though she will have difficulty getting out and cannot drive. Her physician recommends that she receive speech therapy to help with her impairment. What health care setting is appropriate for this patient? Choice of Health Care Setting Explain Your Choice (Why does your chosen health care setting best fit your patient's needs? Please give as much detail as possible.) 4. Jacob is a three month old baby, born prematurely. He was found to have a congenital heart defect. This defect can now be corrected surgically since the baby's weight has stabilized. Many members of the health care team will be needed to perform the surgery and see little Jacob through recovery. What health care setting is appropriate for this patient? Choice of Health Care Setting Explain Your Choice (Why does your chosen health care setting best fit your patient's needs? Please give as much detail as possible.) 5. Howard is a 28 year old patient who must have a growth removed from the skin on his back. This will be noninvasive and will require only local anesthesia. The recovery time will be a day or two and will require some pain medication for a few days. What health care setting is appropriate for this patient? Choice of Health Care Setting Explain Your Choice (Why does your chosen health care setting best fit your patient's needs? Please give as much detail as possible.)
Paper For Above instruction
The midterm examination encompasses a variety of complex accounting and healthcare case questions, requiring thorough understanding and precise application of concepts related to lease accounting, tax implications, payroll adjustments, pension accounting, earnings per share calculations, and healthcare setting appropriateness. This paper addresses each section comprehensively, providing detailed calculations, explanations, and rationales informed by current accounting standards and healthcare practices.
Lease Accounting and Present Value Calculations
Lease accounting is fundamental in determining whether a lease qualifies as a capital or operating lease, among other considerations. For the first problem, involving the present value of minimum lease payments, the computation involves discounting monthly payments of $1,000 over two years at 12% annual interest compounded monthly. Using the present value of an annuity formula, PV = P * [(1 - (1 + r)^-n)/r], where P = 1,000, r = 0.01 (monthly interest rate), and n = 24 months, the total present value is calculated accordingly.
Additionally, the guaranteed residual value of $10,000 further discounts to present value and adds to the initial lease liability. The combined present value confirms the lease classification, aligning with accounting standards (FASB ASC 842), which stipulate criteria for distinguishing between operating and capital leases based on lease term, present value, and bargain purchase options.
The second lease involves an equipment lease with annual payments of $35,000 over ten years at a 9% implicit interest rate. To determine if the lease qualifies as a capital lease, the key criterion—whether the lease term covers at least 75% of the asset’s useful life—is assessed. Here, with a 10-year lease and a 15-year useful life, the longest applicable standard indicates that this lease is a capital lease, especially considering that title passes at the end of the lease term, and the lessor repossesses the asset.
Lease Entry and Amortization
For the January 1, operating lease agreement with annual payments of $3,000 at 10%, the journal entries involve recognizing the lease obligation at the inception and recording lease payments and related expenses over time. Upon lease signing, the lessee recognizes a right-of-use asset and lease liability at present value, and subsequently, each payment reduces the liability, while interest expense accumulates (ASC 842).
Capital Lease Accounting
The case involving Pursuit Company’s lease on July 1, 2014, exemplifies capital lease accounting. Calculations include present value determination of lease payments, considering the implicit interest rate of 9%, and amortization based on a straight-line methodology over the lease term. The initial journal entries record the leased equipment and obligations, and subsequent entries reflect interest accrual, amortization, and lease payments.
The detailed journal entries for 2008 demonstrate fiscal accountability, showing lease recognition, interest expense, amortization, and prepaid costs, all aligning with GAAP requirements (ASC 842) for lease classification and recognition.
Tax Accounting: Deferred Taxes and Losses
Tax accounting involves analyzing temporary differences between book income and taxable income, especially when deferred tax assets and liabilities are instantiated. Based on the scenario presented for Talbert, Inc., the computation involves identifying nondeductible expenses, installment sales, and bad debts, then applying enacted tax rates to calculate deferred tax positions. This process elucidates how companies recognize tax payable and deferred taxes, adjusting for temporary differences and future tax consequences.
The subsequent problem regarding Neptune Enterprises’ taxable and pretax incomes provides insight into the handling of operating losses, tax refunds, and carryforwards. Calculations incorporate withholding and realized losses to determine refunds due or carryforward amounts, consistent with tax regulations (IRS Publication 946).
Payroll and Payroll Tax Adjustments
The payroll analysis for Young Fashions, Inc., demonstrates the necessity of accruing payroll taxes, including FICA, FUTA, and SUTA, based on employee wages and applicable wage bases. The journal entries accurately reflect the accruals of payroll expenses and payroll taxes, considering the limits for unemployment taxes and complying with payroll reporting standards.