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- Petes Petroleum, Inc., an SEC registrant with a calendar year-end, is in the business of constructing and operating offs] lore oil platforms. Petes Petroleum is required legally to dismantle and remove the platforms at the end of their useful lives, which is estimated to be 10 years. On January 1, 2019, Pete constructed and began operating an offshore oil platform off the coast of Brazil. The total capitalized cost to construct the platform was 3,700,000. In addition, while the future cost of dismantling the oil platform is difficult to estimate, Pete believes there is a 40% chance that the future cost will be 1,425,000, a 40% chance it will be 1,650,000, and a 20% chance that it will cost 2,125,000. The appropriate discount rate is 12%, and Pete uses the straight-line method of depreciation. Required: 1. Prepare the journal entries that Pete should record in 2019 related to the oil platform. 2. Prepare an amortization schedule for the asset retirement obligation. 3. Next Level Prepare a table showing the effect of accounting for the asset retirement obligation on assets, liabilities, shareholders equity, and net income relative to accounting for the associated costs at the end of the assets service life when the expenditure is made.Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2019. Gross receipts were 300,000. The following expenses were incurred and paid as indicated: Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 810, 2020. a. Calculate Ducks net income from the concert for tax purposes for 2019. b. Using the present value tables in Appendix H, what is the true cost to Duck if it had to defer the 100,000 deduction for the performers until 2020? Assume a 5% discount rate and a 21% marginal tax rate in 2019 and 2020.At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial reporting purposes, the asset has a 4-year life with no residual value and is depreciated by the straight-line method beginning in 2019. For tax purposes, the asset is depreciated under MACRS using a 5-year recovery period. Prior to 2019, Conley had no deferred tax liability or asset. The difference between depreciation for financial reporting purposes and income tax purposes is the only temporary difference between pretax financial income and taxable income. The current income tax rate is 30%, and no change in the tax rate has been enacted for future years. In 2019 and 2020, taxable income will be higher or lower than financial income by what amount?
- On July 1, 2020, ABC Incorporated accepted several office equipment from a shareholder with original cost of P2,000,000. On the same date, the items had aggregate market value totalling to P1,500,000. No entry has been made by ABC since no consideration was given up for these items. Moreover, cost incurred to recondition the donated items amounted to P100,000 and were charged to operations during the period. How much should be property be initially recognized?Sienna Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2021, these licensing agreements have a fair value of $857,500 and represent Sienna's sole asset. Although Sienna currently has no liabilities, the company has a $199,000 net operating loss (NOL) carry-forward because of recent operating losses. On January 1, 2021, Paoli, Inc., acquired all of Sienna's voting stock for $1,070,000. Paoli expects to extract operating synergies by integrating Sienna's software into its own products. Paoli also hopes that Sienna will be able to receive a future tax reduction from its NOL. Assume an applicable federal income tax rate of 21 percent. If there is a greater than 50 percent chance that the subsidiary will be able to utilize the NOL carry-forward, how much goodwill should Paoli recognize from the acquisition? If there is a less than 50 percent chance that the…On July 1, 2020, Matcha, Inc. acquired as a long-term investment for P1,600,000, a 40% interest in Milk Tea Company when the fair value of Milk Tea’s net assets was P4,000,000. Due to the COVID-19 pandemic, Milk Tea Company experienced difficulty in continuing its business and reported the following net losses: 2020- P1,000,000 2021- P1,400,000 2022- P1,800,000 2023- P800,000 What amount should be reported as share in loss from investment in associate for the year 2023? a. P320,000 b. P280,000 c. P120,000 d. P80,000
- On May 31, 2024, the Arlene Corporation adopted a plan to sell its cosmetics line of business, considered a component of the entity. The assets of the component were sold on October 13, 2024, for $1,120,000. The component generated operating income of $300,000 from January 1, 2024, through disposal. In its income statement for the year ended December 31, 2024, the company reported before-tax income from operations of a discontinued component of $620,000. What was the book value of the assets of the cosmetics component? Multiple Choice $800,000 $1,420,000 $300,000 All of these choices are incorrect.On September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2021, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $13 million. The pretax income from operations of the division during 2021 was $2 million. Pretax income from continuing operations for the year totaled $16 million. The income tax rate is 25%. Ziltech reported net income for the year of $5.1 million. Required:Determine the book value of the division's assets on December 31, 2021. (Enter your answer in whole dollars not in millions.)On September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2021, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $13 million. The pretax income from operations of the division during 2021 was $3 million. Pretax income from continuing operations for the year totaled $16 million. The income tax rate is 25%. Ziltech reported net income for the year of $8.1 million. Determine the book value of the division's assets on December 31, 2021.
- On September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2021, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $11 million. The pretax income from operations of the division during 2021 was $4 million. Pretax income from continuing operations for the year totaled $14 million. The income tax rate is 25%. Ziltech reported net income for the year of $7.2 million.Required:Determine the book value of the division’s assets on December 31, 2021.On September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2021, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $16 million. The pretax income from operations of the division during 2021 was $6 million. Pretax income from continuing operations for the year totaled $19 million. The income tax rate is 25%. Ziltech reported net income for the year of $9.0 million. Required: Determine the book value of the division's assets on December 31, 2021. (Enter your answer in whole dollars not in millions.)On May 28, 2021, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $510 million. The fair value of Harman's identifiable tangible and intangible assets totaled $575 million, and the fair value of liabilities assumed by Pesky was $149 million. Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2021. Management has provided the following information: Fair value of Harman, Inc. $ 490 million Fair value of Harman's net assets (excluding goodwill) 430 million Book value of Harman's net assets (including goodwill) 518 million Required:1. Determine the amount of goodwill that resulted from the Harman acquisition.2. Determine the amount of goodwill impairment loss that Pesky should recognize at the end of 2021, if any.3. If an impairment loss is required, prepare the journal entry to record the loss.