Blog

Required: Part 3(a) (16 Points) Prepare the journal entry to reflect all of the pension plan transactions and events that occurred during 2023. As a general rounding rule, if required, round final answers to the nearest whole dollar. Pension Journal Entry for 2023: Account Debit Credit [account1] [debit1] [credit1] [account2] [debit2] [credit2] [account3] [debit3] [credit3] [account4] [debit4] [credit4] [account5] [debit5] [credit5] [account6] [debit6] [credit6] [account7] [debit7] [credit7] [account8] [debit8] [credit8] [account9] [debit9] [credit9] [account10] [debit10] [credit10]  

On January 1, 2023, Axl Company (“the Company”) acquired 6,000 shares of Slash Corporation for $102,000. Slash Corporation has 30,000 total shares outstanding. On November 15, Slash Corporation declared and paid a total dividend of $117,000 to all shareholders. Slash Corporation reported net income of $380,000 for 2023. The fair value of Slash Corporation’s stock was $14 per share on December 31, 2023. How much higher would the Company’s net income be if the Company accounted for the investment in Slash Corporation under the equity method, as opposed to the fair value method?

Part 4: Free Response – Leases (22 Points) Jovi Company (“Lessee”) and Sambora Corporation (“Lessor”) sign a non-cancellable lease agreement dated January 1, 2023, in which Lessor leases equipment to Lessee beginning immediately on January 1, 2023. The following information relates to the lease agreement: The term of the lease is two years and requires equal rental payments at the beginning of each year, beginning in 2023. The Lessor sets the annual rental rate to earn a rate of return of 8% per year; the Lessee is unaware of this rate. The lease contains no renewal options; the equipment will revert to the Lessor at the termination of the lease. The equipment has a fair value at the commencement of the lease of $350,000, a cost to the Lessor of $280,000, and an estimated economic life of three years. If relevant, assume that at the end of the equipment’s economic life, the estimated salvage value is $6,400. The Lessor estimates that the equipment will have a residual value of $43,000 at the end of the lease and the residual value is not guaranteed by the Lessee. If relevant, the Lessee anticipates that it is probable that the value of the equipment at the end of the lease term will be only $37,000. If relevant, both parties depreciate similar equipment owned on a straight-line basis. If relevant, the Lessee’s incremental borrowing rate is 6% per year. Important Note regarding Grading: If you would like the opportunity to receive partial credit at the instructor’s discretion (strongly recommended), please email me at cindy.dosch@warrington.ufl.edu a picture or a scan of your work within 15 minutes of submitting your exam. Be sure to clearly label your work. The work must agree to the final answer originally submitted within Canvas to be eligible for partial credit. Required: Record your final answers to the required items in the table immediately below and provide the requested journal entries beginning on the next page. As a general rounding rule, if required, round final answers to the nearest whole dollar. If an amount is zero, write “0” – DO NOT leave blank.   Item Your Answer (a) Amount of annual rental payment $[answer-a] (b) Classification of lease by Lessee [answer-b] (c) Classification of lease by Lessor [answer-c]

Part 2: Free Response – Income Taxes (20 Points) Willie Nelson Co. had the following cumulative temporary differences as of December 31, 2022: Taxable temporary differences – Installment sales: $86,000 Deductible temporary difference – Bad debts:   $63,000 Additionally, as of 2022, the enacted tax rate was 20% for 2022 and all future periods. In 2023, the Company reported pre-tax financial accounting income of $610,000. During 2023, legislation was passed that changed the enacted tax rate from 20% to 28% for all future years, beginning in 2024. The following additional information is available: During the prior year, on January 1, 2022, the Company completed a contract and recognized $129,000 in gross profit on an accrual basis. For tax purposes, the Company will recognize the gross profit on an installment basis evenly over three years, beginning in 2022. During 2023, the Company received $29,000 in municipal bond interest income. In 2023, bad debt expense was estimated to be $2,000. Write-offs of uncollectible accounts in 2023 totaled to $8,000. For 2023, depreciation for financial accounting purposes is $74,000, whereas depreciation under MACRS is $82,000. During 2023, the Company incurred fines for pollution violations of $8,000. Finally, assume that there was no beginning balance in the income taxes payable account as of January 1, 2023. Important Note regarding Grading: If you would like the opportunity to receive partial credit at the instructor’s discretion (strongly recommended), please email me at cindy.dosch@warrington.ufl.edu a picture or a scan of your work within 15 minutes of submitting your exam. Be sure to clearly label your work. The work must agree to the final answer originally submitted within Canvas to be eligible for partial credit. Required: (20 Points) Record your final answers to the required items in the table immediately below. As a general rounding rule, if required, round final answers to the nearest whole dollar. If an amount is zero, write “0” – DO NOT leave blank.   Item as of December 31, 2023 Your Answer (a) Income tax expense (benefit) – Current [answer-a] (b) Income tax expense (benefit) – Deferred [answer-b] (c) Income taxes payable [answer-c] (d) Net DTA per balance sheet [answer-d] (e) Net DTL per balance sheet [answer-e]

Part 5: Free Response – Investments and Derivatives (18 Points) The following information relates to two independent fact patterns concerning R. Stewart Company’s investments and derivatives. As a general rounding rule, if required, round percentages to the second decimal (e.g., 5.75%) and final answers to the nearest whole dollar.

Part 3: Free Response – Stockholder’s Equity (15 Points) On January 1, 2023, Boston Corporation had the following stockholder’s equity accounts. The common stock was originally issued for $8 per share years ago. Common stock, $3 par, 90,000 shares issued and outstanding $270,000 Additional paid-in capital – Common stock $530,000 Retained earnings $340,000   During 2023, the Company had the following transactions related to its common stock: January 20: Paid a cash dividend that was declared in the prior year of $37,000. February 15: Repurchased 6,000 shares of treasury stock at $12 per share. August 5: 2,300 shares of treasury stock were reissued at $10 per share. September 26: 800 shares of treasury stock were retired. December 17: 10% stock dividend declared and distributed on outstanding stock when the market price per share was $14.   Assume the Company reported no net income during the current year. Important Note regarding Grading: If you would like the opportunity to receive partial credit at the instructor’s discretion (strongly recommended), please email me at cindy.dosch@warrington.ufl.edu a picture or a scan of your work within 15 minutes of submitting your exam. Be sure to clearly label your work. The work must agree to the final answer originally submitted within Canvas to be eligible for partial credit. Required: (15 Points) Record your final answers to the required items in the table immediately below. If required, round percentages to the second decimal (e.g. 5.75%) and final answers to the nearest whole dollar.   Item as of December 31, 2023 Your Answer (a) Common Stock account balance $ [answer1] (b) Additional Paid-In Capital – Common Stock account balance $ [answer2] (c) Retained Earnings account balance $ [answer3] (d) Treasury Stock account balance $ [answer4] (e) Number of shares outstanding [answer5] shares

Part 2: Free Response – Troubled-Debt Restructuring (20 Points) On December 31, 2023, E. Money Bank (“the Bank”) enters into a debt restructuring agreement with Ronnie Spector Company (“the Company”), which is experiencing financial difficulties. The Company currently owes $7,000,000 plus $90,000 of accrued interest. The note was originally issued at par with a stated rate of 8% with interest payable annually on December 31. The present market rate for a loan of this nature is 12%. The Bank agrees to restructure the note with the following modifications: Reducing the principal by $400,000 and forgiving all of the accrued interest. Extending the maturity date from December 31, 2023 to December 31, 2025. Reducing the stated interest rate from 8% to 6%, payable annually on December 31. Required: Record any required journal entries on December 31, 2023; December 31, 2024; and December 31, 2025 for BOTH Ronnie Spector Company and E. Money Bank. Record your final entries in the provided spaces beginning on the next page. If no journal entry is required, write “no journal entry is required” – DO NOT LEAVE BLANK. If required, round percentages to the second decimal (e.g. 5.75%) and final answers to the nearest whole dollar.

Originally Classified as Held-to-Maturity December 31, 2024 Entry related to Fair Value: Account Debit Credit [account1] [debit1] [credit1] [account2] [debit2] [credit2] [account3] [debit3] [credit3] [account4] [debit4] [credit4] [account5] [debit5] [credit5] [account6] [debit6] [credit6]  

Jagger Company (“the Company”) owned 32,000 shares of Bowie Corporation. The shares were purchased in 2022 for $512,000 and are carried on the Company’s books at historical cost. On January 20, 2023, the Company declared a property dividend that consisted of one share of Bowie Corporation for every ten shares held by the Company’s shareholders. On the date of declaration, each share of Bowie Corporation was trading for $23 per share and the Company had 230,000 shares of its own stock outstanding. What is the net impact on total stockholders’ equity on the date of declaration?

Section I: Multiple-Choice (42 Points – 3 Points Each) Choose the one alternative that best completes the statement or answers the question.