Powell Panther Corporation: Income Statements for Year Ending December 31 (millions of dollars) 2019 2018 Sales $ 1,200.0 $1,000.0 Operating costs excluding depreciation and amortization 1,020.0 850.0 EBITDA $ 180.0 $ 150.0 Depreciation and amortization 30.0 25.0 Earnings before interest and taxes (EBIT) $ 150.0 $ 125.0 Interest 21.7 20.2 Earnings before taxes (EBT) $ 128.3 $ 104.8 Taxes (25%) 32.1 26.2 $ 78.6 $ 61.3 Net income 96.2 Common dividends 79.7 Powell Panther Corporation: Balance Sheets as of December 31 (millions of dollars) 2019 2018 Assets Cash and equivalents $ 12.0 $ 10.0 Accounts receivable 180.0 150.0 Inventories 180.0 200.0 $ 372.0 300.0 $ 672.0 Total current assets $ 360.0 Net plant and equipment 250.0 Total assets $610.0 Liabilities and Equity Accounts payable $108.0 $ 90.0 Accruals 72.0 60.0 Notes payable 67.0 515 Total current liabilities $247.0 $ 201.5 Long-term bonds 150.0 150.0 Total liabilities $397.0 $ 351.5 Common stock (50 million shares) 50.0 50.0 Retained earnings 225.0 208.5 Common equity $275.0 $ 258.5 Total liabilities and equity $672.0 $610.0

Powell Panther Corporation: Income Statements for Year Ending December 31 (millions of dollars) 2019 2018 Sales $ 1,200.0 $1,000.0 Operating costs excluding depreciation and amortization 1,020.0 850.0 EBITDA $ 180.0 $ 150.0 Depreciation and amortization 30.0 25.0 Earnings before interest and taxes (EBIT) $ 150.0 $ 125.0 Interest 21.7 20.2 Earnings before taxes (EBT) $ 128.3 $ 104.8 Taxes (25%) 32.1 26.2 $ 78.6 $ 61.3 Net income 96.2 Common dividends 79.7 Powell Panther Corporation: Balance Sheets as of December 31 (millions of dollars) 2019 2018 Assets Cash and equivalents $ 12.0 $ 10.0 Accounts receivable 180.0 150.0 Inventories 180.0 200.0 $ 372.0 300.0 $ 672.0 Total current assets $ 360.0 Net plant and equipment 250.0 Total assets $610.0 Liabilities and Equity Accounts payable $108.0 $ 90.0 Accruals 72.0 60.0 Notes payable 67.0 515 Total current liabilities $247.0 $ 201.5 Long-term bonds 150.0 150.0 Total liabilities $397.0 $ 351.5 Common stock (50 million shares) 50.0 50.0 Retained earnings 225.0 208.5 Common equity $275.0 $ 258.5 Total liabilities and equity $672.0 $610.0

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 10MC

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Comprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax income from continuing operations (of which revenues are 295,000), the following items are included in this pretax income: Colts taxable income totals 93,000 in 2019. The difference between the pretax financial income and the taxable income is due to the excess of tax depreciation over financial depreciation on assets used in continuing operations. At the beginning of 2019, Colt had a retained earnings balance of 310.000 and a deferred tax liability of 8,100. During 2019, Colt declared and paid dividends of 48,000. It is subject to tax rates of 15% on the first 50,000 of income and 30% on income in excess of 50,000. Based on proper interperiod tax allocation procedures, Colt has determined that its 2019 ending deferred tax liability is 14,100. Required: 1. Prepare a schedule for Colt to allocate the total 2019 income tax expense to the various components of pretax income. 2. Prepare Colts income tax journal entry at the end of 2019. 3. Prepare Colts 2019 income statement. 4. Prepare Colts 2019 statement of retained earnings. 5. Show the related income tax disclosures on Colts December 31, 2019, balance sheet.
Refer to the information for Cox Inc. above. What amount would Cox record as depreciation expense for 2019 if the units-of-production method were used ( Note: Round your answer to the nearest dollar)? a. $179,400 b. $184,000 c. $218,400 d. $224,000
Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
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Interperiod Tax Allocation Peterson Company has computed its pretax financial income to be 66,000 in 2019 after including the effects of the appropriate items from the following information: Petersons accountant has prepared the following schedule showing the future taxable and deductible amounts at the end of 2019 for its three temporary differences: At the beginning of 2019, Peterson had a deferred tax liability of 12,540 related to the depreciation difference and 4,710 related to the accrual-basis sales difference. In addition, it had a deferred tax asset of 14,850 related to the warranty difference. The current tax rate is 30%, and no change in the tax rate has been enacted for future years. Required: 1. Compute Petersons taxable income for 2019. 2. Prepare Petersons income tax journal entry for 2019 (assume no valuation allowance is necessary). 3. Next Level Identify the permanent differences in Items 1 through and explain why you did or did not account for them as deferred tax items in Requirement 2.
Leverage Cook Corporation issued financial statements at December 31, 2019, that include the following information: Balance sheet at December 31,2019 Assets $8,000,000 Liabilities $1,200,000 Stockholders' equity (300,000 shares) $6,800,000 Income statement for 2019: Income from operations $1,200,000 Less: Interest expense (100,000) Income before taxes $1,100,000 Less: Income taxes expense (0,30) (330,000) Net income $ 770,000 The levels of assets, liabilities, stockholders' equity, and operating income have been stable in recent years; however, Cook Corporation is planning a 51,800,000 expansion program that will increase income from operations by $350,000 to $1,550,000, Cook is planning to sell 8.5% notes at par to finance the expansion. Required: What earnings per share does Cook report before the expansion?
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