Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 2JC
To determine
If valuation allowance be recorded to offset deferred tax asset .
Given Information:
FD Inc. is designer and manufacturer of exclusive women’s wear. FD holds a record to report strong earnings. But the earnings of FD had declined in past few years. There are some buyers that appreciate the designs of FD Inc. despite the downfall;a large contract is finalized by the FD with one of its buyers. The management of FD decided to overhaul business to regain the concerns of buyers. A law suit is going on regarding te discrimination on FD, this law suit can cause huge payouts to FD. There is no book-tax dissimilarities in FD reports, as he incurred loss in current year and have had nominal income in past two years.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Read about Kelly Corporation in CA4-3 in the end of chapter and answer questions a) & b).
CA4-3. (Earnings Management)
Charlie Brown, controller for Kelly Corporation, is preparing the company's income statement at year-end. He notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. Since the company has sold equipment routinely in the past, Brown knows the losses cannot be reported as an unusual item. He also does not want to highlight it as a material loss since he feels that will reflect poorly on him and the company. He reasons that if the company had recorded more depreciation during the assets' lives, the losses would not be so great. Since depreciation is included among the company's operating expenses, he wants to report the losses along with the company's expenses, where he hopes it will not be noticed.
Answer the following questions:
(a) What are the ethical issues involved?
(b) What should Brown do?
The question:
Wildhorse Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the company’s fiscal year on November 30, 2020, the following accounts appeared in two of its trial balances.
Unadjusted
Adjusted
Unadjusted
Adjusted
Accounts Payable
$25,400
$25,400
Notes payable
$35,000
$35,000
Accounts Receivable
31,000
31,000
Owner’s Capital
87,400
87,400
Accumulated Depr.—Equipment
35,000
46,000
Owner’s Drawings
10,000
10,000
Cash
25,000
25,000
Prepaid Insurance
10,200
2,500
Cost of Goods Sold
508,000
508,000
Property Tax Expense
2,500
Freight-Out
5,700
5,700
Property Taxes Payable
2,500
Equipment
145,000
145,000
Rent Expense
15,000
15,000
Depreciation Expense
11,000
Salaries and Wages Expense
96,000
96,000
Insurance Expense
7,700
Sales Revenue
720,000…
Ivanhoe department stores located in Midtown Metropolis. during the past several years net income has been declining because suburban shopping centers have been attracting business away from city areas. At the end of the companies fiscal year on November 30, 2025 these accounts appeared in its adjustable trial balance.
1. Prepare a retained earnings Statement. (list items that increase retained earnings first)
2. Prepare a classified balance sheet. (list current assets in order of liquidity)
3. Calculate the profit margin and the gross margin profit rate (round answers to one decimal place)
4. Revised net income:
Revised profit margin:
Revised gross porfit rate:
please it is humble request answer all requirements in detail with full working or skip/leave if you can't answer all please answer in text not image please answer step by step so that I can understand easily thanks
Chapter 17 Solutions
Intermediate Accounting (2nd Edition)
Ch. 17 - Prob. 17.1QCh. 17 - When will income tax expense and income taxes...Ch. 17 - Will permanent differences cause the effective tax...Ch. 17 - When do permanent differences arise?Ch. 17 - How are deferred tax assets and deferred tax...Ch. 17 - Prob. 17.6QCh. 17 - Prob. 17.7QCh. 17 - Prob. 17.8QCh. 17 - Prob. 17.9QCh. 17 - How does a firm determine the need for a valuation...
Ch. 17 - Prob. 17.11QCh. 17 - Prob. 17.12QCh. 17 - Prob. 17.13QCh. 17 - How does an entity account for uncertain tax...Ch. 17 - Prob. 17.15QCh. 17 - Prob. 17.16QCh. 17 - Do U.S. GAAP and IFRS classify deferred tax...Ch. 17 - Prob. 17.18QCh. 17 - Cavan Company prepared the following...Ch. 17 - Prob. 17.2MCCh. 17 - Prob. 17.3MCCh. 17 - Prob. 17.4MCCh. 17 - Prob. 17.5MCCh. 17 - Prob. 17.6MCCh. 17 - Prob. 17.7MCCh. 17 - Prob. 17.1BECh. 17 - Income Taxes Payable. Limmox Company has...Ch. 17 - Permanent Differences. Simmox Company's income...Ch. 17 - Permanent Differences. Plimmox Company's income...Ch. 17 - Permanent Differences, Reconciliation of Statutory...Ch. 17 - Prob. 17.6BECh. 17 - Prob. 17.7BECh. 17 - Prob. 17.8BECh. 17 - Prob. 17.9BECh. 17 - Prob. 17.10BECh. 17 - Temporary Differences, Deferred Tax Liability....Ch. 17 - Temporary Differences. Deferred Tax Asset....Ch. 17 - Temporary Differences, Deferred Tax Asset. Using...Ch. 17 - Prob. 17.14BECh. 17 - Realizability of Deferred Assets. Maves, Inc....Ch. 17 - Prob. 17.16BECh. 17 - Change in Tax Rates. Finer Shoes Company recorded...Ch. 17 - Change in Tax Rates, IFRS. Use the same...Ch. 17 - Prob. 17.19BECh. 17 - Prob. 17.20BECh. 17 - Prob. 17.21BECh. 17 - Prob. 17.22BECh. 17 - Prob. 17.23BECh. 17 - Prob. 17.24BECh. 17 - Prob. 17.25BECh. 17 - Prob. 17.1ECh. 17 - Prob. 17.2ECh. 17 - Prob. 17.3ECh. 17 - Prob. 17.4ECh. 17 - Temporary Differences, Deferred Tax Assets and...Ch. 17 - Temporary Differences, Deferred Tax Assets and...Ch. 17 - Prob. 17.7ECh. 17 - Prob. 17.8ECh. 17 - Change in Tax Rates, Permanent Difference,...Ch. 17 - Prob. 17.10ECh. 17 - Prob. 17.11ECh. 17 - Net Operating Loss, Carryback. Phlash Photo Labs,...Ch. 17 - Net Operating Loss, Carryforward. Loggins Lumber...Ch. 17 - Prob. 17.14ECh. 17 - Prob. 17.15ECh. 17 - Net Operating Loss, Carryforward, Tax Rate Change....Ch. 17 - Prob. 17.17ECh. 17 - Prob. 17.18ECh. 17 - Uncertain Tax Positions. Lewis Eagle Corporation...Ch. 17 - Uncertain Tax Positions. Based on the information...Ch. 17 - Prob. 17.1PCh. 17 - Temporary Differences, Deferred Tax Liabilities,...Ch. 17 - Temporary Differences, Deferred Tax Liabilities....Ch. 17 - Prob. 17.4PCh. 17 - Temporary Differences, Deferred Tax Liabilities,...Ch. 17 - Prob. 17.6PCh. 17 - Net Operating Loss, Carryback, Carryforward,...Ch. 17 - Prob. 17.8PCh. 17 - Net Operating Loss, Carryback. Carryforward. CPF...Ch. 17 - Prob. 17.10PCh. 17 - Prob. 17.11PCh. 17 - Prob. 17.12PCh. 17 - Permanent Differences, Temporary Tax Differences,...Ch. 17 - Prob. 1JCCh. 17 - Prob. 2JCCh. 17 - Prob. 1FSCCh. 17 - Prob. 1SSCCh. 17 - Prob. 2SSCCh. 17 - Prob. 3SSCCh. 17 - Scene 1: The concept of the deferred tax liability...Ch. 17 - Basis for Conclusions Case 2: Uncertain Tax...
Knowledge Booster
Similar questions
- Molly starts up in business as a florist on 1 April 2004. For the first six months, she has a draft profit of $12,355. On investigation you discover the following: Rent paid for the 12 months ending 31 March 2005 of $800 has not been recorded in the accounts. Closing inventory in the accounts at a cost of $1,000 has a net realisable value of $800. What is the adjusted profit for the period? A $11,355 B $11,755 C $12,155 D $12,555arrow_forward1. Resto supplies incorporated takes 32,000 loss on a number of older ovens in its inventory; it paid the manufacturer 170,000 for them but can sell them for only 75,000. Choices: a. Full disclosure principle b. Time period assumption c. Materiality constraint d. Cost Principle e. Revenue recognition principle f. Conservatism Constraint g. Matching principle h. Economic entity assumption i. Monetary unit j. Going concern k. Some other answers 2. A hotel corporation is preparing its end of year financial statements. Management has informed the accountant that in six weeks it will begin to close 12 of its properties. The accountant will provide information related to these future actions on the current end of year financial statements because of the _______ principle. Choices: a. Full disclosure principle b. Time period assumption c. Materiality constraint d. Cost Principle e. Revenue recognition principle f. Conservatism Constraint g. Matching principle h. Economic entity assumption…arrow_forward1. Barack Company reported operating expenses in two categories namely distribution and general administrative expenses. The adjusted trial balance at year-end included the following expense and loss accounts for the current year: Accounting and legal fees P1,200,000, Advertising P1,500,000, Freight out P800,000, Interest P700,000, Loss on sale of long term investment P300,000, Officer's salaries P2,250,000, Rent for office space P2,200,000, Sales salaries and commissions P1,400,000. Additional information: One-half of the rented premises is occupied by the sales department. What amount should be reported as Total Distribution costs?arrow_forward
- HOW DO I PREPARE A MULTI. INCOME STATEMENT TABLE? Sandhill Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the company’s fiscal year on November 30, 2020, the following accounts appeared in two of its trial balances. Unadjusted Adjusted Unadjusted Adjusted Accounts Payable $25,900 $25,900 Notes payable $35,000 $35,000 Accounts Receivable 31,000 31,000 Owner’s Capital 85,100 85,100 Accumulated Depr.—Equipment 34,000 45,000 Owner’s Drawings 10,000 10,000 Cash 26,000 26,000 Prepaid Insurance 10,400 3,200 Cost of Goods Sold 504,500 504,500 Property Tax Expense 2,500 Freight-Out 6,000 6,000 Property Taxes Payable 2,500 Equipment 146,000 146,000 Rent Expense 15,000 15,000 Depreciation Expense 11,000 Salaries and Wages Expense 96,000 96,000 Insurance Expense…arrow_forwardIdentify the accounting concept that was violated in each of the following situations.1. Astro Turf Company recognizes an expense, cost of goods sold, in the period the product is manufactured.2. McCloud Drug Company owns a patent that it purchased three years ago for $2 million. The controller recently revalued the patent to its approximate market value of $8 million.3. Philips Company pays the monthly mortgage on the home of its president Larry Crosswhite and charges the expenditure to miscellaneous expense.arrow_forwardThe first 3 (A, B and C) are already answed I just need a help with D and E. Thanks in advance. The income statement for Forklift Electrical Ltd for two years are shown below: Forklift Electrical Ltd Income Statement Comparison Current year Prior Year (amounts in thousands) Sales $ 33,750 $ 24,750 Cost of goods sold 21,938 16,830 Gross profit 11,812 $ 7,920 Wages $ 8,775 $ 6,188 Utilities…arrow_forward
- 3. Canine Couture is a specialty dog clothing boutique that sells clothing and clothing accessories for dogs. In 2019, they had gross revenue from sales totaling $86,500. Their operating expenses for this same period were $27,500. If their Cost of Goods Sold (COGS) was 24% of gross revenue, what was their net operating income for the year? Use this information to construct an income statement for the year 2019. Operating Income Cash Retained Earnings Gross Profit Cost of Goods Sold Service Revenue Cost of Services Operating Expenses Sales Revenue PLEASE NOTE: You must enter the account names exactly as written above and all whole dollar amounts will be with "$" and commas as needed (i.e. $12,345). Canine Couture Income Statement for Year Ended 2019arrow_forwardSolve the following problem in good accounting form. On May 1, 2010, Jollibee Inc., a franchisor, entered into a franchise agreement with Session Delights, a franchisee. The total franchise fees agreed upon is P11,900,000 of which P5,000,000 is payable upon signing and the balance payable in three annual payments. It was agreed that the down-payment is nonrefundable, not withstanding the lack of substantial performance of services by franchisor. What amount of deferred revenue should be reported in the May 1, 2010 financial statements of Jollibee Inc.?arrow_forwardCHOOSE A,B,C OR D AND EXPLAIN ALL OF YOUR DECISIONS 1. Fossil is famous for fashion wristwatches and leather goods. At the end of a recent year, Fossil’s total assets added up to $363,000,000, and stockholders’ equity was $228,000,000. How much were Fossil’s liabilities? a. Cannot determine from the data given b. $363,000,000 c. $135,000,000 d. $228,000,000 2. Assume that Fossil sold watches to a department store on account for $48,000. How would this transaction affect Fossil’s accounting equation? a. Increase both assets and liabilities by $48,000 b. Increase both assets and stockholders’ equity by $48,000 c. Increase both liabilities and stockholders’ equity by $48,000 d. No effect on the accounting equation because the effects cancel out 3. External users of accounting information are: A. actual and potential investors, employees, lenders B. customers, suppliers, investors, owners, managing the business C. shareholders, managers, the government, the general public D. customers,…arrow_forward
- Expense Recognition Question: How do you indicate the amount of expense that should be recognized for each of the following events of a company, that occurred during the year of 2018? 1. Space was leased from another company for a one-year period, starting November 1, 2018. Five months of rent at $2,340 per month was paid in advance. 2. Incurred $27,350 of research costs for new products. Although no new items have been created, management is certain that the research will result in new products. 3. The business used electricity and water during December for manufacturing, the company will receive the bill in January 2019 and pay it in February 2019. Electricity and water costs totalling $45,375 have been recorded for the period from January 1 to November 30, 2018. Please Explain.arrow_forwardCurrent Attempt in Progress Wildhorse Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the company’s fiscal year on November 30, 2020, the following accounts appeared in two of its trial balances. Unadjusted Adjusted Unadjusted Adjusted Accounts Payable $ 25,400 $ 25,400 Notes payable $ 35,000 $ 35,000 Accounts Receivable 31,000 31,000 Owner’s Capital 87,400 87,400 Accumulated Depr.—Equipment 35,000 46,000 Owner’s Drawings 10,000 10,000 Cash 25,000 25,000 Prepaid Insurance 10,200 2,500 Cost of Goods Sold 508,000 508,000 Property Tax Expense 2,500 Freight-Out 5,700 5,700 Property Taxes Payable 2,500 Equipment 145,000 145,000 Rent Expense 15,000 15,000 Depreciation Expense 11,000 Salaries and Wages Expense 96,000 96,000 Insurance Expense 7,700…arrow_forwardLisa Co. purchased goods $10,000 on credit payable after 3 months. What would be the effect of this transaction on the accounting equation? Assets will decrease by $10,000 and liabilities will decrease by $10,000 Assets will increase by $10,000 and liabilities will decrease by $10,000 Assets will increase by $10,000 and liabilities will increase by $10,000 Assets and liabilities balance will remain unchanged.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning