week 3

3-paragraph evaluation of the choice of design and threats to validity in a quasi-experimental design. Your response should include an evaluation of the choice of design, the author’s rationale for the design choice, the types of validity presented and the critical differences among them, the author’s performance in explaining them, and how you would assess the study’s validity and the information you would require to do so.

1. (TCO A) Adam’s Adorable Creations Company provided the following financial information for its installment sales for the current year.
Financial Data:      
      Installment sales for current year                               $3,000,000 
      Cost of goods sold on installment basis                     $1,500,000 
      Repossessed merchandise: Estimated value              $18,000 
      Repossessed merchandise: Unpaid balances             $65,000 
      Payments by customers                                           $2,000,000 
Required:              
      a) Prepare journal entries for the end of the year based on the information above.  
      b) Prepare the entry to record the gross profit realized in the current year.  

. (TCO B) The Accent Corporation shows the following information.                              
            On January 1, 2012, Accent purchased a donut machine for $700,000.                    
                  A) Pretax financial income is $2,300,000 in 2012 and $2,400,000 in 2013.
                  B) Taxable income is expected in future years with an expected tax rate of 35%.
                  C) The company recognized an extraordinary gain of $150,000 in 2013 (which is fully taxable).
                  D) Tax-exempt municipal bonds yielded interest of $150,000 in 2013.
                  E) Straight-line basis for 7 years for financial reporting (See Appendix 11A.)
                  F) Half-year convention basis depreciation for 4 years for tax purposes.
                        Required:        
                        1)        Compute taxable income and income taxes payable for 2013.
                        2)        Prepare the journal entries for income tax expense, income taxes payable, and deferred taxes for 2013.
                        3)        Prepare the deferred income taxes presentation for December 31, 2013 balance sheet. (Points : 40)

3. (TCO D) Absolute Leasing, Inc. agrees to lease equipment to Allen, Inc. on January 1, 2012. They agree on the following terms:          
1) The normal selling price of the equipment is $1,500,000 and the cost of the asset to Absolute Leasing, Inc. was $1,350,000.   
2) At the end of the lease, the equipment will revert to Absolute Leasing, Inc. and have an unguaranteed residual value of $100,000. Their implicit interest rate is 10%.          
3) The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life).            
4) Absolute Leasing, Inc. incurred costs of $9,000 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectability of the lease payments is reasonably predictable.           
5) The lease begins on January 1, 2012 and payments will be in equal annual installments.            
6) Allen will pay all maintenance, insurance, and tax costs directly and annual payments of $140,000 on January 1 of each year.           
            
Required:        
a) Determine what type of lease this would be for the lessee and calculate the initial obligation.   
b) Prepare Allen, Inc.’s amortization schedule for the lease terms.   
c) Prepare all the journal entries for Allen, Inc. for 2012. Assume a calendar year fiscal year. (Points : 40)

4. (TCO F) Cash flows from operating activities (indirect and direct methods). 

Presented below is the income statement of Angola, Inc.                              
            Sales    $1,250,000      
            Cost of goods sold      $560,000         
            Gross profit     $690,000         
            Operating expenses     $240,000         
            Income before income taxes   $450,000         
            Income taxes   $180,000         
            Net income      $270,000         
                                    
In addition, the following information related to net changes in working capital is presented.                                
                           
            Cash    $35,000  Debit         
            Accounts receivable                $26,000  Debit
            Inventories                  $14,000  Debit
            Salaries payable (operating expenses) $12,000  Credit     
            Accounts payable                    $36,000  Credit
            Income taxes payable  $15,000  Credit
                                    
Depreciation expense for the year was $24,500                                 
Deferred tax liability account increased $6,500                                 
                                    
Required:                                
Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows                               
(a)       using the indirect method.                  
(b)      using the direct method. (Points : 40)

5. (TCO G) Selected financial ratios.           
The following information pertains to Allbright, Inc.            
Cash                                                    $75,000 
Accounts receivable                            $190,000
Inventory                                            $130,000
Plant assets (net)                                 $650,000
Total assets                                          $1,045,000 
 
Accounts payable                                $140,000 
Accrued taxes and expenses payable  $32,000
Long-term debt                                   $165,000
Common stock ($10 par)                    $265,000
Paid-in capital in excess of par           $120,000
Retained earnings                               $323,000
Total equities                                       $1,045,000 
            
Net sales (all on credit)                       $1,800,000 
Cost of goods sold                              $1,200,000 
General & Admin Expenses               $430,000 
Net income                                          $170,000 
            
Required         
Compute the following: (It is not necessary to use averages for any balance sheet figures involved.)          
(a)       Current ratio
(b)      Inventory turnover
(c)       Receivables turnover
(d)      Book value per share
(e)       Earnings per share
(f)       Debt to total assets
(g)      Profit margin on sales
(h)      Return on common stock equity (Points : 40)

(TCO E) Discuss the three approaches for reporting changes in accounting principles. Include additional points about how these approaches may be impacted by the adoption of new IFRS standards. (Points : 40)

Discussion 1

Discussion 2