ACC 345 Module One Homework Template

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School

Southern New Hampshire University *

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Course

345

Subject

Finance

Date

Jan 9, 2024

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xlsx

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Chapter 2 2.4 Income Flows Versus Cash Flows Transaction or Event Cash Equipment Cash Contributed by Owners - - Purchase of Machine for Cash (100,000) 100,000 Recognition of Rent Revenue 125,000 Recognition of Operating Expenses (30,000) Recognition of Depreciation (80,000) Sale of Machine 22,000 (20,000) Totals $ 17,000 $ - $ - 2.8 Fair Value Measurements (a) common stocks Level 1 (b) bonds Level 1 or 2 (c) real estate Level 2 (d) timber investments Level 2 or 3 (e) private equity funds Level 3 (f) illiquid asset-backed securities Level 3 The text states, "Over sufficiently long time periods, net income equals cash inflows min flows with owners." Demonstrate the accuracy of this statement in the following scena $50,000 each to form a new business. The owners used the amounts contributed to pu cash. They estimated that the useful life of the machine was five years and the salvage the machine to a customer for an annual rental of $25,000 a year for five years. Annual taxes, and other items totaled $6,000 annually. At the end of the fifth year, the owners instead of the $20,000 salvage value initially estimated. (Hint: Compute the total net in than cash flows with owners for the five-year period as a whole. If it doesn't impact Net Common Stock The text discusses inputs managers might use to determine fair values of assets and liab classifications of assets identified in SFAS No. 157. Suppose a major university endowm of assets, including (a) common stocks; (b) bonds; (c) real estate; (d) timber investment sales of timber, private equity funds, and illiquid asset-backed securities. Consider how estimate the fair values of each of those classes of assets, and characterize the inputs y Level 3. Use drop-down to select answers in yellow cells

2.12 Effect of Valuation Method for Nonmonetary Asset on Balance Sheet and Income Sta REQUIRED 2016 2017 Dr Cr Dr Cr Cash 100,000 Land 150,000 30,000 Gain on land 50,000 Loss on land 30,000 150,000 150,000 30,000 30,000 2016 2017 Dr Cr Dr Cr Cash 100,000 Land 150,000 30,000 Gain on sale of land 50,000 Unrealized gain - OCI Unrealized loss - OCI 30,000 150,000 150,000 30,000 30,000 Assume Walmart acquires a tract of land on January 1, 2016, for $100,000 cash. On Dec market value of the land is $150,000. On December 31, 2017, the current market value sells the land on December 31, 2018, for $180,000 cash. Ignore income taxes. Indicate the effect on the balance sheet and income statement of 2016, 2017, and 2018 under each of the following valuation methods (Parts a-c). a. Valuation of the land at acquisition cost until sale of the land (Approach 1) Land would be valued at acquisition cost of $100,000 initially, and would not change th building is sold for $180,000, Walmart would recognize a gain of $80,000 on the income b. Valuation of the land at current market value and including market value changes 2) c. Valuation of the land at current market value but including unrealized gains and lo comprehensive income until sale of the land (Approach 3) d. Why is retained earnings on December 31, 2018, equal to $80,000 in all three case amounts of net income each year? Net income over sufficiently long time periods equals cash inflows minus cash outflows for $100,000 and sold it for $180,000 in 2018. Thus, the total effect on net income thro in the value of the land bought and sold is $80,000. The three different methods of asse measurement recognize this $80,000 in different patterns over time, but the total is the

2.16 Deferred Tax Assets REQUIRED $62,542,000 What is the dollar amount of the deferred tax asset for the net operating loss carryforw $23,609,594 The income tax expense entry decreased net income; the valuation allowance entry de Components of the deferred tax asset of Biosante Pharmaceuticals, Inc., are shown in E deferred tax liabilities. a. At the end of 2008, the largest deferred tax asset is for net operating loss carryforwa carryforwards, also referred to as tax loss carryforwards, are amounts reported as taxab tax authorities generally do not "pay" corporations for incurring losses, companies are a losses to future years to offset taxable income. These future tax benefits give rise to de 2008, what is the dollar amount of the company's net operating loss carryforwards? b. Biosante has gross deferred tax assets of $28,946,363. However, the net deferred tax The company has recorded a valuation allowance for the deferred tax asset equal to th asset. This means that the company believes that it is “more likely than not” going to us they expire. This implies that management is not optimistic about the company’s ability c. The valuation allowance for the deferred tax asset increased from $21,818,084 to $2 How did this change affect the company's net income?

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Net Income - - 125,000 (30,000) (80,000) 2,000 $ 17,000 nus cash outflows, other than cash ario: Two friends contributed urchase a machine for $100,000 value was $20,000. They rented out l cash operating costs for insurance, s sold the equipment for $22,000, come and the total cash flows other t Income, don't include it.) bilities and identifies different ment has investments in a wide array ts, which receive cash flows from the portfolio manager would you identify as Level 1, Level 2, or

atement 2018 Dr Cr 180,000 120,000 60,000 180,000 180,000 2018 Dr Cr 180,000 120,000 80,000 20,000 200,000 200,000 cember 31, 2016, the current e of the land is $120,000. The firm f the preceding information for hrough 2018. In 2018, when the e statement. s each year in net income (Approach osses in accumulated other es despite the reporting of different s. Walmart acquired the land in 2016 ough the realization of the increase et valuation and income e same.

wards? creased the deferred tax asset. Exhibit 2.10. The company had no ards. (Net operating loss ble losses on tax filings. Because the allowed to "carry forward" taxable eferred tax assets.) As of the end of x assets balance is zero. Explain. he entire amount of the deferred tax se its deferred tax assets before y to generate future taxable income. 28,946,363 between 2007 and 2008.

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100,000 (100,000) 125,000 30,000 22,000 (80,000) (20,000) (30,000) 2,000 (20,000) - Level 1 Level 2 Level 3 Level 1 or 2 Level 2 or 3

Land would be valued at acquisition cost of $100,000 initially, and would not change through 201 Land would be valued at acquisition cost of $100,000 initially, and would not change through 201 Land would be valued at acquisition cost of $100,000 initially, and would be marked to market im 20,000 30,000 50,000 60,000 80,000 100,000 120,000 150,000 180,000 Net income over sufficiently long time periods equals cash inflows minus cash outflows. Walmart Net income over sufficiently long time periods equals cash inflows plus cash outflows. Walmart ac Net income over sufficiently long time periods equals cash inflows minus cash outflows. Walmart

$62,542,000 $23,609,594 $0 Text solution answer $62,542,000 $23,609,594 $0 The company has recorded a valuation allowance for the deferred tax asset equal to the entire am The company has recorded a valuation allowance for the deferred tax asset equal to the entire am The company has recorded a valuation allowance for the deferred tax asset equal to the entire am The income tax expense entry increased net income; the valuation allowance entry increased the The income tax expense entry decreased net income; the valuation allowance entry decreased th The income tax expense entry decreased net income; the valuation allowance entry increased the asset for these net operating loss carryforwards is $23,609,594. This $62,542,000), it would be able to save $0.3775 in tax because it wou

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18. In 2018, when the building is sold for $180,000, Walmart would recognize a gain of $30,000 on the incom 18. In 2018, when the building is sold for $180,000, Walmart would recognize a gain of $80,000 on the incom mmediately upon learning its fair market value. Walmart would recognize a gain of $50,000 on the income sta t acquired the land in 2016 for $100,000 and sold it for $180,000 in 2018. Thus, the total effect on net income cquired the land in 2016 for $100,000 and sold it for $180,000 in 2018. Thus, the total effect on net income t t acquired the land in 2016 for $100,000 and sold it for $180,000 in 2018. Thus, the total effect on net income

mount of the deferred tax asset. This means that the company believes that it is “more likely than not” going mount of the deferred tax asset. This means that the company plans on using recognizing the asset in a later mount of the deferred tax asset. This means that the company believes that it has "a low likelihood" of being e deferred tax asset. he deferred tax asset. e deferred tax asset. s is the income tax “shield” available due to the $62,542,000 tax loss carryforwards. The link between these t uld offset that dollar of taxable income with a dollar of its tax loss carryforwards.

me statement. me statement. atement. e through the realization of the increase in the value of the land bought and sold is $180,000. The three diffe through the realization of the increase in the value of the land bought and sold is $100,000. The three differe e through the realization of the increase in the value of the land bought and sold is $80,000. The three differ

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g to use its deferred tax assets before they expire. This implies that management is not optimistic about the c r year. This implies that management is not optimistic about the company’s ability to generate future taxable g used in the current or any future year. This implies that management is not optimistic about the company’s two amounts is that the deferred tax asset represents the tax effect of the tax loss carryforwards. Generally,

erent methods of asset valuation and income measurement recognize this $180,000 in different patterns ove ent methods of asset valuation and income measurement recognize this $100,000 in different patterns over ti rent methods of asset valuation and income measurement recognize this $80,000 in different patterns over ti

company’s ability to generate future taxable income. e income. s ability to generate future taxable income. this text uses 35–40% as the tax effect of income and deductions. You can back into the rate that was assum

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