Question 1
I need help with a tax return. I need the forms completed associated with this tax return. Can anybody help? 100. Devon Bishop, age 40, is single. He lives at 1507 Rose Lane, Albuquerque, NM 87131. His Social Security number is 111-11-1111. Devon does not want $3 to go to the Presidential Election Campaign Fund. Devon was divorced in 2008 after 15 years of marriage. He pays alimony of $18,000 a year to his former spouse, Ariane. Ariane?s Social Security number is 123-45-6789. Devon?s son, Tom, who is age 16, resides with Ariane. Devon pays child support of $12,000 per year. Ariane has provided Devon with a signed Form 8332 in which she releases the dependency deduction to him for 2012. Tom?s Social Security number is 123-45-6788. Devon owns a sole proprietorship for which he uses the accrual method of accounting. His revenues and expenses for 2012 are as follows: Sales revenue $740,000 Cost of goods sold 405,000 Salary expense 88,000 Rent expense 30,000 Utilities 8,000 Telephone 6,500 Advertising 4,000 Bad debts 5,000 Depreciation 21,000 Health insurance* 26,000 Accounting and legal fees 7,000 Supplies 1,000 * $18,000 for employees and $8,000 for Devon. Other income received by Devon includes the following: Dividend income: Swan, Inc. $10,000 Wren, Inc. 2,000 Interest income: First Bank 11,000 Second Bank 2,500 City of Asheville bonds 17,000 Lottery winnings (tickets purchased cost $500) 10,000 During the year,Devon and his sole proprietorship had the following property transactions: a. Sold Blue, Inc. stock for $45,000 on March 12, 2012. He had purchased the stock on September 5, 2009, for $50,000. b. Received an inheritance of $300,000 from his Uncle Henry. Devon used $200,000 to purchase Green, Inc. stock on May 15, 2012 and invested $100,000 in Gold, Inc. stock on May 30, 2012. c. Received Orange, Inc. stock worth $9,500 as a gift from his Aunt Jane on June 17, 2012. Her adjusted basis for the stock was $5,000. No gift taxes were paid on the transfer. Aunt Jane had purchased the stock on April 1, 2006. Devon sold the stock on July 1, 2012, for $22,000. d. On July 15, 2012, Devon sold one-half of the Green, Inc. stock for $40,000. e. Devon was notified on August 1, 2012, that Yellow, Inc. stock he purchased from a colleague on September 1, 2011, for $52,500 had become worthless. While he perceived that the investment was risky, he did not anticipate that the corporation would declare bankruptcy. f. On August 15, 2012, Devon received a parcel of land in Phoenix worth $220,000 in exchange for a parcel of land he owned in Tucson. Because the Tucson parcel was worth $245,000, he also received $25,000 cash. Devon?s adjusted basis for the Tucson parcel was $210,000. He originally purchased it on September 18, 2009. g. On December 1, 2012, Devon sold the condominium in which he had been living for the past 10 years. The sales price was $480,000, selling expenses were $28,500, and repair expenses related to the sale were $9,400. Devon and Ariane had purchased the condominium as joint owners for $180,000. Devon had received Ariane?s ownership interest as part of the divorce proceedings. The fair market value at that time was $240,000. Devon?s potential itemized deductions, exclusive of the aforementioned information, are as follows: Medical expenses (before the 7.5% floor) $ 9,500 Property taxes on residence 5,300 State income taxes 4,000 Charitable contributions 10,000 Mortgage interest on residence 9,900 Sales taxes paid 5,000 During the year, Devon makes estimated Federal income tax payments of $40,000. Compute Devon?s lowest net tax payable or refund due for 2012 assuming that he makes any available elections that will reduce the tax. If you use tax forms for your computations, you will need Forms 1040, 4562, 8332, and 8824 and Schedules A, B, C, D, and SE. Suggested software: H&R BLOCK At Home.
Question 2
"Polices for Budget Development Hector Corporation is a manufacturing company with annual sales of $25 million. Its budget committee has created the following policy that the company uses each year in developing it master budget for the following calendar year: May The company?s controller and other members of the budget committee meet to discuss plans and objectives for the next year. The controller conveys all relevant information from this meeting to division managers and department heads June Division managers, department heads, and controller meet to discuss the corporate plans for next year. They develop a timetable for developing next year?s budget data. July Division managers and department heads develop budget data. The vice president of sales provides them with final sales, estimates, and complete monthly sales estimates for each production line. August Estimates of next year?s monthly production activity and inventory levels and inventory levels are completed. Divisional managers and department heads communicate these estimates to the controller, who distributes them to other operating areas September All operating areas submit their revise budget data. The controller integrates their labor requirements, direct material requirements; units cost estimates, cash requirements, and profit estimates into preliminary master budget. October The budget committee meets to discuss the preliminary master budget and to make any necessary corrections, additions, or deletions. The controller incorporations all authorized changes into a final draft of the master budget. November The controller submits the final draft to the budget committee for approval. If the committee approves it, it is distributed to all corporate officers, division managers, and department heads. 1. Comment on this policy 2. What changes would you recommend?
Question 3
1) Aramar Company has the following sales budget: Month Cash Sales Credit Sales February $24,000 $48,000 March 18,800 29,200 April 10,800 28,400 Collections of credit sales are 35% in the month of sale, 30% in the month after sale and 33% two months after sale. No uncollectible accounts are expected. Required: Prepare a schedule of cash collections for the three months. 2) The Scadoba Company has the following information available: Month Budgeted Sales March $150,000 April 153,000 May 151,000 June 254,500 July 252,500 The cost of goods sold rate is 38% and the desired ending inventory level is 25% of the next month's cost of sales. Required: Prepare a purchases budget for April, May and June. 3) Direct Material Direct Labor Std. price per unit of input $12 per foot $14 per hour Actual price per unit of input $14 per foot $13 per hour Std. inputs allowed per unit of output 5 feet 3 hours Actual units of input 2,500 feet 1,550 hours Actual units of output 600 units Required: Compute the price and quantity variances for direct materials and direct labor. 4) Progressive Company produces a product in a process-costing system involving several departments. The company uses the weighted-average method of product costing. The first department's data for the month of April follow: Units in beginning work-in-process inventory 25,000 Units started during April1 210,000 Units completed during April 180,000 Units in ending work-in-process inventory 55,000 Direct materials added in current month $188,000 Conversion costs added in current month $124,000 Direct materials?beginning work-in-process inventory $25,750 Conversion costs?beginning work-in-process inventory $3,225 Stage of Completion: Materials Conversion Costs Beginning work-in-process inventory 100% 30% Ending work-in-process inventory 100% 65% Required: A) Compute equivalent units for materials and conversion costs. B) Compute the cost per unit for materials and conversion costs. C) Compute the cost of the units transferred. D) Compute the cost of the ending work-in-process inventory. 5) Splitsville Company has two departments. Factory overhead costs are applied based on direct labor cost in Department A and machine hours in Department B. The following information is available: Budgeted Items Dept. A Dept. B Direct labor cost 280,000 $145,000 Machine hours 31,000 50,000 Factory overhead cost $185,000 $160,000 Actual data for Job #10 are as follows: Actual Items Dept. A Dept. B Direct materials requisitioned $10,000 $16,000 Direct labor cost $11,000 $14,000 Machine hours 5,000 3,000 Required: A) Compute the budgeted factory overhead rate for Department A. B) Compute the budgeted factory overhead rate for Department B. C) What is the total overhead cost for Job #10? D) If Job #10 consists of 80 units of product, what is the unit cost of this job?
Question 5
During management?s 2012 annual review of Bad Inc.?s financial results and application of financial controls, two errors were identified. Vacation accrual There was an unintentional mathematical error in computing the vacation accrual for 2011, resulting in a $2.5 million under accrual at Bad Inc.?s 2011 year-end. The calculation of the vacation accrual appears to have been appropriately calculated in 2010. Bad debt reserve Management also discovered an error in the computer program used to calculate the bad debt reserve. The computer program uses the aging of each receivable and calculates the necessary bad debt reserve. In late 2012, management determined the program used to calculate the bad debt reserve mistakenly did not consider unapplied cash embedded in the accounts receivable. The cash is applied to the customer account when it is received, but it takes several days to apply this cash to specific outstanding invoices in accounts receivable. Compounding the problem, the accounts receivable aging file is constantly updated and Bad Inc. only has copies of the month-end aging for the last six months. In the first month of 2013, management had the accounts receivable clerk go back and update the aging of all accounts receivable for any unapplied cash on hand at month-end for each of the last six months. The updated aging report was then applied to the bad debt program. The bad debt reserve was overstated by an average of $3.1 million during the six-month period (the highest and lowest of the overstatement were $4.2 million and $1.0 million, respectively). The 2012 year-end bad debt reserve balance was overstated by $3.0 million. In the preliminary closing for 2012, the bad debt reserve was reduced by $3.0 million, to $7.8 million. Additional financial statement information is provided below (amounts in millions). Account As reported 2010 As reported 2011 2012 Bad debt allowance $ 10.0 $ 11.0 $ 7.8 Accrued vacation liability $ 7.5 $ 5.7 $ 8.1 Income taxes payable $ 0.4 $ 0.5 $ 0.4 Bad debt expense $ 11.2 $ 13.2 $ 10.0 Payroll expense $120.5 $132.9 $135.0 Pretax income $ 2.5 $ 1.25 $ 6.0 Other information: ? Bad Inc.?s income tax rate was 20% in 2010 and 2011, but increased to 30% in 2012. ? Before the errors, the company?s net income was $2.0 million in 2010, $1.0 million in 2011 and $4.2 million in 2012. ? Before the errors, the company?s retained earnings totaled a deficit of $900,000 at the beginning of 2010, $1.1 million at the end of 2010, $2.1 million at the end of 2011 and $6.3 million at the end of 2012. ? Bad Inc. borrowed $5.0 million in 2011. Bad Inc. is a private company but has to provide audited comparative financial statements to its lender within 60 days of its year-end. The only two covenants for its loan include a requirement to maintain net income of at least $1.0 million and retained earnings of at least $2.0 million. ? The company is also considering converting from US GAAP to IFRS. ? The controller asked you to prepare a draft footnote that provides appropriate disclosure of the two errors under US GAAP and IFRS. The controller told you it is impractical to revise the detailed aging for prior years? receivables to properly reflect unapplied cash. A suggested format for each year is as follows (amounts in millions): Account As reported 2010 Correction 2010 As restated 2010 As reported 2011 Correction 2011 As restated 2011 Bad debt allowance $ 10.0 $ 11.00 Accrued vacation $ 7.5 $ 5.70 Income taxes payable $ 0.4 $ 0.50 Bad debt expense $ 11.2 $ 13.20 Payroll expense $120.5 $132.90 Pretax income $ 2.5 $ 1.25 Income tax expense $ 0.5 $ 0.25 Net income $ 2.0 $ 1.00 Beginning R/E $ (0.9) $ 1.10 Ending R/E $ 1.1 $ 2.10 Please post excel file with the following chart completed and formulas inserted where necessary.
