Part 2: Free Response – Income Taxes (20 Points) Willie Nelson Co. had the following cumulative temporary differences as of December 31, 2022: Taxable temporary differences – Installment sales: $86,000 Deductible temporary difference – Bad debts:   $63,000 Additionally, as of 2022, the enacted tax rate was 20% for 2022 and all future periods. In 2023, the Company reported pre-tax financial accounting income of $610,000. During 2023, legislation was passed that changed the enacted tax rate from 20% to 28% for all future years, beginning in 2024. The following additional information is available: During the prior year, on January 1, 2022, the Company completed a contract and recognized $129,000 in gross profit on an accrual basis. For tax purposes, the Company will recognize the gross profit on an installment basis evenly over three years, beginning in 2022. During 2023, the Company received $29,000 in municipal bond interest income. In 2023, bad debt expense was estimated to be $2,000. Write-offs of uncollectible accounts in 2023 totaled to $8,000. For 2023, depreciation for financial accounting purposes is $74,000, whereas depreciation under MACRS is $82,000. During 2023, the Company incurred fines for pollution violations of $8,000. Finally, assume that there was no beginning balance in the income taxes payable account as of January 1, 2023. Important Note regarding Grading: If you would like the opportunity to receive partial credit at the instructor’s discretion (strongly recommended), please email me at cindy.dosch@warrington.ufl.edu a picture or a scan of your work within 15 minutes of submitting your exam. Be sure to clearly label your work. The work must agree to the final answer originally submitted within Canvas to be eligible for partial credit. Required: (20 Points) Record your final answers to the required items in the table immediately below. As a general rounding rule, if required, round final answers to the nearest whole dollar. If an amount is zero, write “0” – DO NOT leave blank.   Item as of December 31, 2023 Your Answer (a) Income tax expense (benefit) – Current [answer-a] (b) Income tax expense (benefit) – Deferred [answer-b] (c) Income taxes payable [answer-c] (d) Net DTA per balance sheet [answer-d] (e) Net DTL per balance sheet [answer-e]

On January 1, 2023, R.E.M. Company had 180,000 shares of common stock outstanding. During 2023, the Company had the following common stock transactions: ·       February 1: Issued a 9% stock dividend. ·       May 31: Acquired 40,000 shares of treasury stock. ·       September 1: Issued a 3-for-1 split. ·       December 31: Reissued 20,000 shares of treasury stock. What is the weighted number of shares outstanding for EPS purposes as of December 31, 2023

The Beatles Co. has following investment information available as of December 31, 2023:   Cost Fair Value Gain (Loss) Investment in Harrison Co. stock  $ 180,000 $ 198,000 $ 18,000 Investment in Lennon Co. stock 135,000 122,000 (13,000) Investment in McCartney Co. stock 244,000 317,000 73,000 Investment in Starr Co. stock 229,000 183,000 (46,000) Total 788,000 820,000 32,000 During 2023, the Company purchased the McCartney Co. stock and elected to report this particular investment under the fair value option. The Company has not made this election for any of the other stocks. Additionally, assume the Company has a beginning debit balance in the Fair Value Adjustment account of $7,000. Which of the following would appear in the December 31, 2023 adjusting entry related to the Fair Value Adjustment account?

On January 1, 2020, The Sweet Corporation issued 600, 7% bonds with a face value of $1,000 each at par. The bonds mature on January 1, 2030 and pay interest semiannually on July 1 and January 1. Each bond is convertible into 30 shares of the Company’s $10 par common stock. In 2023, the Company wishes to reduce its interest costs and offers an incentive to bondholders whereby the Company will pay $45 cash for each bond converted in 2023. On December 31, 2023, 400 of the 600 bonds are converted when the market price of the Company’s common stock is $52 per share. Upon conversion, what amount is recorded to Additional Paid-In Capital – Common Stock?

Part 3: Free Response – Stockholder’s Equity (15 Points) On January 1, 2023, Boston Corporation had the following stockholder’s equity accounts. The common stock was originally issued for $8 per share years ago. Common stock, $3 par, 90,000 shares issued and outstanding $270,000 Additional paid-in capital – Common stock $530,000 Retained earnings $340,000   During 2023, the Company had the following transactions related to its common stock: January 20: Paid a cash dividend that was declared in the prior year of $37,000. February 15: Repurchased 6,000 shares of treasury stock at $12 per share. August 5: 2,300 shares of treasury stock were reissued at $10 per share. September 26: 800 shares of treasury stock were retired. December 17: 10% stock dividend declared and distributed on outstanding stock when the market price per share was $14.   Assume the Company reported no net income during the current year. Important Note regarding Grading: If you would like the opportunity to receive partial credit at the instructor’s discretion (strongly recommended), please email me at cindy.dosch@warrington.ufl.edu a picture or a scan of your work within 15 minutes of submitting your exam. Be sure to clearly label your work. The work must agree to the final answer originally submitted within Canvas to be eligible for partial credit. Required: (15 Points) Record your final answers to the required items in the table immediately below. If required, round percentages to the second decimal (e.g. 5.75%) and final answers to the nearest whole dollar.   Item as of December 31, 2023 Your Answer (a) Common Stock account balance $ [answer1] (b) Additional Paid-In Capital – Common Stock account balance $ [answer2] (c) Retained Earnings account balance $ [answer3] (d) Treasury Stock account balance $ [answer4] (e) Number of shares outstanding [answer5] shares

Originally Classified as Held-to-Maturity December 31, 2024 Entry related to Fair Value: Account Debit Credit [account1] [debit1] [credit1] [account2] [debit2] [credit2] [account3] [debit3] [credit3] [account4] [debit4] [credit4] [account5] [debit5] [credit5] [account6] [debit6] [credit6]  

Jagger Company (“the Company”) owned 32,000 shares of Bowie Corporation. The shares were purchased in 2022 for $512,000 and are carried on the Company’s books at historical cost. On January 20, 2023, the Company declared a property dividend that consisted of one share of Bowie Corporation for every ten shares held by the Company’s shareholders. On the date of declaration, each share of Bowie Corporation was trading for $23 per share and the Company had 230,000 shares of its own stock outstanding. What is the net impact on total stockholders’ equity on the date of declaration?

FACT PATTERN #1 On January 1, 2023, the Company purchased 8%, 10-year bonds with a face value of $720,000 when the annual market rate of interest was 6%. Interest is payable annually on January 1 each year. The Company classified this investment as available-for-sale. If relevant, the Company uses the effective-interest method to amortize any discount or premium. The following fair value information is available for this investment. Assume that this investment is the only available-for-sale security within the Company’s portfolio. Date Fair Value December 31, 2023 $ 829,100 December 31, 2024 815,700 On January 1, 2025, immediately after the interest was collected, the Company sold the bonds for $812,300. Required: (a) (11 Points) Record the journal entries for the Company for two requested dates, beginning below. Assume any entries prior to these dates were properly prepared by the Company already. If required to round, round final answers to the nearest whole dollar. Assume that the Company prepares annual adjusting entries on December 31 each year. If no journal entry is required, write “no journal entry is required” – DO NOT LEAVE BLANK.

Section I: Multiple-Choice (42 Points – 3 Points Each) Choose the one alternative that best completes the statement or answers the question.

Section II: True/False (10 Points – 1 Point Each)