- 35) Southern’s Pizza bought a used Toyota delivery van on January 2, 2014 for $23,000. The van was expected to remain in service for four years (102,000 miles). At the end of its useful life Southern’s officials estimated that the van’s residual value would be $2,600. The van traveled 40,000 miles the first year, 33,000 miles the second year and 18,000 miles the third year, and 11,000 miles in the fourth year. REQUIREMENTS: 1. Prepare a schedule of depreciation expense per year for the van under three depreciations methods. 2. Which method best track’s the wear and tear on the van 3. Which method would Southern‘s prefer to use for the income tax purposes? Explain in detail why Southern’s prefers this method. 1. Requriement Prepare a schedule of depreciation expense per year for the van under the depreciation methods (for unit-of-production and double-declining balances, round to the nearest two decimal places after each step of calculation. For years with $0 depreciation, make sure enter “0” in the appropriate column. Year Straight-Line Unit of Production Double-Declining Balance 2014 2015 2016 2017 Total
2. Requirement Which method best tracks the wear and tear on the van? The _________________(double-declining balance, straight-line, units-of-production) method tracks the wear and tear on the van most closely. Requirement 3. Which method would Southern’s prefer to use for income tax purposes? Explain why in detail why Southern’s prefers this method. For income tax purposes Southern’s would prefer the _____________________( double-declining balance, straight-line, units-of-production) method because it provides the _______________(least or most) depreciation, and thus, the ____________,(largest or smallest) tax deductions in the early life, of the asset.
- 38) California Company included the following items in its financial statements for 2014, the current year (amounts in millions) Requirement 1. Show how the company reported cash flow from financing activities during 2014. (the current year) Enter amounts in millions. Use minus or parenthesis sign to show cash outflows) Cash flows from financing activities ________ ______________ Examples are (Borrowing, cash, decrease in total ________ ______________ liabilities, dividends paid, increase in total stock ________ ______________ holdings income, Operating Income, Payment long- ________ ______________ term debt, Proceeds from issuance of common Stock, total liabilities, total share holders’ equity) Data Table Payment of long-term debt $17,050 Proceeds from Issuance of Common stock $ 8,500 Total Liabilities Current year-end $32,305 Preceding year-end $38,037 Total Stockholders’ Equity Current year-end $23,473 Preceding year-end $14,035 Borrowings $6,000 Dividends Paid $195 Net Sales Current year $20,000 Preceding year $28,000 Net Income Current year $2,200 Preceding year $1,993 Operating Income Current year $5,780 Preceding year $4,004
- 39) Donnahoo, Investments specializes in low-risk government bonds.
Requirement 1. Identify each of Donnahoo’s transactions as operating(o), Investing(I), financing (f), noncash investing and financing (NIF0, or a transaction that is not reported on the statement of cash flow (N). Indicate whether each item increases (+) or decreases (-) cash. The indirect method used for operating activities. _______ a. Loss on sale of equipment _______ b. Decrease in accounts receivable _______c. Acquisition of equipment by issuances by note payable _______d. Increase in accounts payable ________e. Payment of cash dividend _______f. Purchase of long-term investment with cash ______g. Cash sale of land ________h. Increase in prepaid expenses _______ i. Increase in salary payable ________J Depreciation of equipment ________k. Sale of long-term investment ________l. Issuance of Common Stock for Cash _______m. Decrease in accrued liabilities ________n. Amortization of intangible assets ________o. Acquisition of building by cash payment ________p. Payment of long term debt _______q. Issuance of long-term note payable to borrow cash _______r. Purchase of treasury stock _______s. Net Income
- 40) Donaghue Company’s financial statements follow in 2014 using total revenues, Donaghue average collection period for accounts and note receivable is (round intenm calculation to one decimal place and your final answer to the nearest whole number.) A) 16 days C) 2 days B) 1 day D) 32 days Donaghue Company income statement Year ending December 31, 2014 and 2013 In millions, expected per share data 2014 2013 Revenue 13,300 11,800 Revenue from franchised and affiliated restaurants 4,350 3,400 Total Revenues 17,650 15,200 Food and Paper (Cost of goods sold) 3,990 2,950 Payroll and Employee benefits 3,300 2,600 Occupancy and other operating expenses 3,300 3,200 Franchised restaurants occupancy expense 945 840 Selling, general and administrative expense 1,825 1,750 Other operating expense, net 540 850 Total Operating expenses 13,900 12,190 Operating Income 3,700 3,010 Interest expense 400 385 Other nonoperating expense, net 99 62 Income before taxes 3,251 2,563 Income tax expense 1,138 1,025 Net income 2,113 1,538 Per common share basic Net Income $2.11 $1.92 Donaghue Company Consolidated Balanced Sheets December 31,2014 and 2013
(In millions, except per share data) 2014 2013
Assets Current Assets : Cash and equivalent 570 425 Accounts and not receivable 700 866 Inventories, at cost, not in excess of market 114 100 Prepaid expense and other current assets 520 410 Total current assets 1,904 1,801
Property and Equipment Property and Equipment, at cost 28,780 26,900 Accumulated depreciation and amortization (8,800) (7,500) Net property and equipment 19,980 19,400 Other Assets Investments in affiliates 1,120 1,020 Goodwill, net 1,730 1,545 Miscellaneous 940 1,120 Total other assets 3,790 3,685 Total Assets 25,674 24,886
Liabilities and stockholders’ Equity Current Liabilities Accounts payable 600 640 Income taxes 70 17 Other taxes 235 210 Accured Interest 183 192 Accured restricting and restaurant closing cost 115 330 Accured payroll and other liabilities 925 705 Current maturities of long-term debt 396 315 Total current liabilities 2,524 2,409 long-term debt 9,100 9,200 Other long-term liabilities and minority interest 660 530 Deferred income taxes 1,005 990 Total Liabilities13,289 13,129 Stockholders’ equity Preferred stock, no par value; authorized- 140 million shares; issued-none ———– ———– Common Stock, $.01 par value; authorized- 20 billion shares; issued— 1,200 million shares 12 12 Additional paid-in capital 1,808 3,057 Unearned ESOP compensation (93) (102) Retained earnings Accumulated other comprehensive Income (loss) (835) (1,570) Common Stock in treasury, at cost; 200 and 400 million shares (9,470) (8,990) Total Stockholders Equity 12,385 11,757 Total Liabilities and stockholders’ equity 25,674 24,886