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Accounting

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Jan 9, 2024

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1. Janson Corporation Company's trial balance included the following account balances on December 31, 2024: Accounts receivable $ 12,200 Inventory 41,000 Patent 12,300 Investments 31,500 Prepaid insurance 7,400 (7400/2) Notes receivable, due 2027 51,800 Investments consist of treasury bills that were purchased in November, 2024, and mature in January, 2025. Prepaid insurance is for the next 24 months. What amount should be included in the current assets section of Janson's December 31, 2024, balance sheet? Current Asset A/R (12200) + Inventory (41000) + Investment (31500) + Prepaid Insurance (7400/2) = 88400 2. Fundamental qualitative characteristics of accounting information are: Faithful representation and relevance. 3. Which of the following is typically characterized as a principle, rather than an assumption? Full disclosure, Revenue + Expense recognition Mixed- attribute measurement

4. Major Company reported 2024 income of $317,000 from continuing operations before income taxes and a before-tax loss on discontinued operations of $78,000. All income is subject to a 25% tax rate. In the income statement for the year ended December 31, 2024, Major Company would show the following line-item amounts for income tax expense and net income: $79,250 and $179,250 respectively. Income tax expense = EBIT x tax = 317000 x 25% = 79250 Net income = Income from continuing expense (after tax) - income from discontinued (after tax) 317000 x 75% - 78000 x 75% = 237750 - 58500 = 17925 16. Major Company reported 2024 income of $300,000 from continuing operations before income taxes and a before-tax loss on discontinued operations of $80,000. All income is subject to a 25% tax rate. In the income statement for the year ended December 31, 2024, Major Company would show the following line-item amounts for income tax expense and net income: Income tax expense = 300000 x 25% = 75000 Net income = (300000 - 80000) x 0.75 = 165000 Major Company reported 2024 income of $307,000 from continuing operations before income taxes and a before-tax loss on discontinued operations of $67,000. All income is subject to a 25% tax rate. In the income statement for the year ended December 31, 2024, Major Company would show the following line-item amounts for income tax expense and net income: Income from continuing operations before income taxes $ 307,000 Income tax expense 76,750 Income from continuing operations $ 230,250 Loss on discontinued operations (net of $16,750 tax benefit) (50,250) Net income ● Provincial Incorporated reported the following before-tax income statement items: Operating income $ 540,000 Nonoperating losses (91,000) Provincial has a 25% income tax rate.

Provincial would report income tax expense as a separately stated line item in the income statement in the amount of: Income before tax = 540000 - 910000 = 449000 Income tax expense = 449000 x 25% = 112250 Provincial Incorporated reported the following before-tax income statement items: Operating income $ 560,000 Nonoperating losses (98,000) Provincial has a 25% income tax rate. ($560,000 − $98,000) × 25% = $115,500 Provincial would report income tax expense as a separately stated line item in the income statement in the amount of: On August 1, 2024, Rocket Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by June 30, 2025. On January 31, 2025, Rocket's fiscal year-end, the following information relative to the discontinued division was accumulated: Operating loss February 1, 2024–January 31, 2025 $ 130,000 Estimated operating losses, February 1–June 30, 2025 76,000 Impairment of division assets at January 31, 2025 24,000 In its income statement for the year ended January 31, 2025, Rocket would report a before-tax loss on discontinued operations of:

Loss on discontinued operation = loss from operation + Loss from disposal = (-130000) + (-24000) = - 1540000 On September 1, 2024, Jacob Furniture Mart enters into a tentative agreement to sell the assets of its Office Furniture division. This division qualifies as a component of the entity according to GAAP regarding discontinued operations. The division's contribution to Jacob's operating income for 2024 was a $3.20 million loss before income tax. Jacob has an average tax rate of 25%. Assume that Jacob sold the division's assets on December 31, 2024, for $24.20 million. The book value of the division's assets was $19.18 million at that date. Required: What would Jacob report in its 2024 income statement regarding the Office Furniture division? (Loss from operation + Gain from disposal ) x tax = - 3.20 + (24.20 - 19.18) = 1.82 x (1- 0.25) = 1.37 On September 1, 2024, Jacob Furniture Mart enters into a tentative agreement to sell the assets of its Office Furniture division. This division qualifies as a component of the entity according to GAAP regarding discontinued operations. The division's contribution to Jacob's operating income for 2024 was a $2.70 million loss before income tax. Jacob has an average tax rate of 25%. Assume that Jacob sold the division's assets on December 31, 2024, for $23.70 million. The book value of the division's assets was $18.73 million at that date. What would Jacob report in its 2024 income statement regarding the Office Furniture division? $ (2,700,000) Operating loss from operations of discontinued component 4,970,000 Gain on disposal of assets of discontinued component $ 2,270,000 Income on discontinued operations before tax −567,500 Income tax ($2,270,000 × 0.25)

$ 1,702,500 Income on discontinued operations Enhancing qualitative characteristics of accounting information include: Comparability and timeliness. Verifiability and Understandability The conceptual framework's qualitative characteristic of faithful representation includes: Neutrality. (Completeness, free from error) For a firm with a current ratio of 2.0, which of the following transactions would most likely cause the ratio to decrease ? The purchase of inventory on account. A company’s liquidity most often refers to: The ability of a company to convert its assets to cash to pay its current obligations. Bronco Electronics' current assets consist of cash, short-term investments, accounts receivable, and inventory. The following data were abstracted from a recent financial statement: Inventory $ 210,000 Total assets $ 1,760,000 Current ratio 3.6 Acid-test ratio2.60 Debt to equity ratio 1.5 Required: Compute the shareholders' equity for Bronco: 704000 Debt to equity ratio = TL / Shareholder equity TL = 1.5 TE → TL - 1.5 TE = 0 TA = TL + TE = 1760000 → TL= 1056000 → TE= 704000 Current ratio = CA/CL = 3.6 → CA = 3.6 CL Acid-test ratio = (CA- Inventory)/ CL = 2.60 → CA - 210000= 2.60 CL → CA = 756 000

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