EXERCISE I 6Red Inc. has experienced several poor earnings and has several assets on its books that are undervalued. It desires torevalue its assets and eliminate the deficit. At December 31,2020, the company owns the following identifiable assets:CostAccumulatedBook valueFair valueDepreciationInventoryP IMP IMP 0.7MLand5 M5 M6.5 MBuildings7.5 MР 3.5 М4.0 M5.0 M1.5 MMachinery &Equipment3.5 М2 M2.2 MThe statement of financial position on December 31,2020, reported a deficit of P 2,000,000.REQUIRED:Journal entries to record the quasi-reorganization.

Lets start with basic understanding regarding quasi reorganization. Quasi reorganization means a…

Answered: Red Inc. has experienced several poor…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Altima Corporation discovered an error in its 2020 financial statements. The firm recorded $4,200,000 in depreciation expense instead of record $4,500,000. Altima has a constant tax rate of 40% and reports 3 years of comparative income statements and 2 years of comparative balance sh- in its annual report. Ignoring the income tax effect, what is the correct journal entry to record the prior-period adjustment? O Depreciation expense Accumulated Depreciation O Retained Earnings 300,000 Income Tax Payable Accumulated Depreciation Retained Earnings O Accumulated Depreciation 300,000 Retained Earnings Accumulated Depreciation 300.000 estion 22 300,000 300,000 120.000 180,000 300,000 300,000
Big Corp. has been undergoing liquidation since December 1, 2020. As of July 31, 2021, the following data are available: P1,500,000 Liabilities not liquidated Liabilities to be liquidated P1,700,000 Assets acquired Assets realized P2,400,000 P2,250,000 Assets not realized P1,375,000 Liabilities assumed P2,625,000 Assets to be realized P2,750,000 Liabilities liquidated P1,750,000 Supplementary charges/debits P2,750,000 Supplementary credits P3,800,000 Answer the following questions: (answers can be repeated) Compute the ending cash balance of cash account (as of July 31, 2021) assuming that Choose... common stock and deficits are P2,750,000 and P750,000, respectively. What is the net gain/(loss) of Big Corp. from the liquidation? Choose...
Wildhorse, Inc. is a calendar-year corporation whose financial statements for 2020 and 2021 included errors as follows: Year Ending Inventory Depreciation Expense 2020 $414000 overstated $360000 overstated 2021 137000 understated 103500 understated Assume that purchases were recorded correctly and that no correcting entries were made at December 31, 2020, or at December 31, 2021. Ignoring income taxes, by how much should Wildhorse's retained earnings be retroactively adjusted at January 1, 2022? $87500 increase $33500 decrease $20500 increase $393500 increase
At the end of 2020, Bonita Company is conducting an impairment test and needs to develop a fair value estimate for machinery used in its manufacturing operations. Given the nature of Bonita's production process, the equipment is for special use. (No secondhand market values are available.) The equipment will be obsolete in 2 years, and Bonita's accountants have developed the following cash flow information for the equipment. Year 2021 2022 2022 Net Cash Flow Estimate $5,440 9,500 $(460) 2,180 3,800 Scrap value $530 970 Probability Assessment 40% Click here to view factor tables 60% 20% 60% 20% 50% 50% Using expected cash flow and present value techniques, determine the fair value of the machinery at the end of 2020. Use a 6% discount rate. Assume all cash flows occur at the end of the year. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) Sair Fair value of the machinery at the end of 2020 $
The Catherine Company, effective January 1, 2020, made the following accounting change: Catherine changed its depreciation method from double-declining-balance to the straight-line method on equipment purchased on January 1, 2018, at a cost of $400,000. The equipment had an estimated useful life of five years and a $30,000 residual value. Catherine is subject to an income tax rate of 30% and can justify the changes. Required:a. Calculate the 2020 depreciation expense.$fill in the blank 1 b. Calculate the the December 31, 2020, accumulated depreciation balance on the equipment.
On Pina's multiple - step income statement for 2023, income from continuing operations is: Select answer from the options below a) $17395. b) $24850. c)$40400. d) $17780.
Bananas, Inc. is a calendar-year corporation. Its financial statements for the years ended December 31, 2019 and 2020 contained the following errors: Ending Inventory Depreciation expense 2019 $25,000 overstatement 10,000 understatement 2020 $40,000 understatement 20,000 overstatement Assume that no correcting entries were made in 2019 or 2020 and that no errors existed in 2018. Ignoring income taxes, by how much will retained earnings at December 31, 2020 be overstated or understated? Enter an overstatement as a positive number and an understatement as a negative number.
In 2020, an accountant for SafeCo inadvertently deleted data related to the financial statements. The following information was able to be retrieved Account 12/31/2020 12/31/2019 Cash 200,000.00 250,000.00 Accounts Receivable Property Plant and Equipment 45,000.00 ? 200,000.00 90,000.00 300,000.00 Goodwill Accounts Payable Long Term Debt 235,000.00 200,000.00 200,000.00 300,000.00 Common Stock 30,000.00 Retained Earnings 200,000.00 20,000.00 1) All balances were normal. 2) No other accounts were presented. 3) Dividends were issued during the period for 30,000 4) After recording $30,000 in depreciation for the year, a $20,000 gain was noted when certain property was sold 5) The Goodwill was acquired through issuance of Common Stock Prepare a Statement of Cash Flows (using Indirect Method) for 2020.
On 1st July 2021, Hard Rock Pty Ltd a small construction business purchased two business assets for the purpose of producing assessable income. The aggregated turnover for the business was less than 10 million dollars. Remember that Hard Rock Ltd has chosen not to use the simplified depreciation rules in any years. You are required to analyse the two scenarios and calculate any allowable deductions arising from the decline in value of the following assets. Use all the relevant methods to show the difference in the claimable amount.   Asset1: An excavator was purchased at the beginning of the year at the cost of $125,000. The estimated life of this asset is 12 years.  Asset2: A luxury car on 1st July at the cost of $92,000. The estimated life of the vehicle is eight years.  Required: a) How would the business decision choose a method of depreciation for the following two situations? b) What considerations a taxpayer should take in choosing a particular method of depreciation?
The following accounts are extracted from the worksheet of X Company on December 31, 2020: Income frem eentinuing operations after taxes: $2,000,000 • During the year, the company suffered from abnonmal and infrequent hurricane damages that had resulted in a $60,000 pretax loss During the yeaI also, the company stopped the activities of its REW segment which had resulted in a pretax operating loss of S100,000 and a net of tax loss on di sposal $20,000 Tax Rate was 30%
The Board of Directors decides that old inventory costing €18,000 is to be written off as the inventory is no longer sellable (it has gone out of fashion). Identical inventory in the past was sold to customers for €31,000. What is the impact on the net assets of the company in monetary terms?

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