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by: Tabitha Mertz DVM


Tabitha Mertz DVM
GPA 3.92

Jack Hall

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Jack Hall
Class Notes
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This 4 page Class Notes was uploaded by Tabitha Mertz DVM on Wednesday September 30, 2015. The Class Notes belongs to ACCT 460 at Western Kentucky University taught by Jack Hall in Fall. Since its upload, it has received 33 views. For similar materials see /class/216732/acct-460-western-kentucky-university in Accounting at Western Kentucky University.


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Date Created: 09/30/15
Instructor Dr Hall Accounting 460 CPA Problems Handout Problem No F83R2 Revised to re ect SFAS No 154 Change in Inventory Method Estimated time 4050 minutes The following trial balance of Garr Corporation at December 31 1985 has been adjusted except for income tax expense Garr Corporation TRIAL BALANCE December 31 1985 Dr Cash 1175000 Accounts receivable net 1695000 Inventory 2185000 Property plant and equipment net 8660000 Accounts payable and accrued liabilities Income tax payable Deferred income tax Common stock Additional paid in capital Retained earnings 1185 Dividends 200000 Net sales Regular Plastics Division Cost of sales Regular 5920000 Plastics Division 1650000 Selling and administrative expenses Regular 2600000 Plastics Division 660000 Interest income Regular Gain on litigation settlement Regular Gain on disposal of Plastics Division Income tax expense 835000 25580000 Income tax expense Estimated tax payment Accrued Total charged to income tax expense estimated Tax rate on all types of income Gain from litigation settlement is a taxable gain and is not considered infrequent The 835000 does not properly reflect current or deferred income tax expense or intraperiod income tax allocation for financial statement purposes Temporary difference not related to plastics division Depreciation per tax return Depreciation per financial statements 69 1 895000 360000 285000 2300000 3675000 3350000 10750000 2200000 65000 550000 150000 25580000 475000 360000 835000 40 750000 575000 Handout Problem No F83 continued p 2 Discontinued operations On October 31 1985 Garr sold its Plastics Division for 2950000 when the carrying amount was 2800000 For financial statement reporting this sale was considered a disposal of a segment of a business Since there was no phaseout period the measurement date was October 31 1985 Change in inventory method On January 1 1985 Garr changed to the FIFO method from the weighted average method of valuation of its inventories The following information concerning inventories is as follows FIFO Average Cost January 1 1985 inventory 1350000 1000000 December 31 1985 inventory 2185000 1950000 Cost of goods sold for 1985 reflects the proper amount after adjusting for the inventory change Capital structure Common stock 10 par traded on a national exchange Shares Outstanding at 1185 200000 Issued on 7185 as a 15 stock dividend 30 000 230 000 Reguired Using the multiple step format prepare a formal income statement and a formal retained earnings statement for Garr for the year ended December 31 1985 All components of income tax expense should be appropriately shown Instructor Dr Hall Accounting 460 Estimated time CPA Problems 4555 minutes Handout Problem No F138R Presented below are the workpaper balances of Bush Inc as of December 31 1986 and 1985 Net change increase Assets 1 986 1985 decrease Cash 313000 195000 118000 Marketable equity securities trading at cost 175000 175000 Allowance to reduce marketable equity securities to market 13000 24000 11000 Accounts receivable net 418000 440000 22000 Inventories 595000 525000 70000 Land 385000 170000 215000 Plant and equipment 755000 690000 65000 Accumulated depreciation 199000 145000 54000 Patents net 57000 60000 3000 Total assets 2486000 2086000 400000 Liabilities and Stockholders Equity Current portion of longterm debt 150000 150000 Accounts payable and accrued liabilities 595000 474000 121000 Bonds payable longterm portion 300000 450000 150000 Notes Payable longterm 179000 161000 18000 Deferred income taxes 44000 32000 12000 Common stock par 10 580000 480000 100000 Additional paidin capital 303000 180000 123000 Retained earnings 335000 195000 140000 Treasury stock at cost 36000 36000 Total liabilities and stockholders equity 2486000 2086000 400000 W 1 On January 20 1986 Bush lnc issued 10000 shares of its common stock for land having a fair value of 215000 2 On February 5 1986 Bush lnc reissued all of its treasury stock for 44000 3 On May 15 1986 Bush lnc paid a cash dividend of 58000 on its common stock 4 On August 8 1986 equipment was purchased for 127000 5 On September 30 1986 equipment was sold for 40000 The equipment cost 62000 and had a carrying amount of 34000 on the date of sale 6 Deferred income taxes represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straightline method forfinancial reporting 7 Net income for 1986 was 198000 8 On November 1 Bush issued 18000 of additional long term notes Reguired Prepare a cash flow statement for Bush Inc for the year ended December 311986 Cash


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