Jackson Company has decided to issue common stock to the public in 2020. This will be...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Jackson Company has decided to issue common stock to the public in 2020. This will be the first public sale, and therefore, the company will issue its first publicly available financial statements since it was formed in 2017. The financial statements that it has prepared for its own use follow: Income Statements For Years Ended December 31, 2017 2018 2019 Sales Cost of goods sold Gross profit Other expenses Income before income taxes $100,000 (35,000) $ 65,000 (62,500) $ 2,500 (525) $ 1,975 $130,000 (45,000) $ 85,000 (75,000) $ 10,000 (2,100) $ 7,900 $180,000 (65,000) $115,000 (83,200) $ 31,800 (6,678) $ 25,122 Income tax expense Net income Balance Sheets December 31 2017 2018 2019 Cash Accounts receivable Inventory Equipment Less: Accumulated depreciation $ 5,500 30,000 40,000 100,000 $ 12,500 50,000 60,000 100,000 $ 9,960 63,000 65,000 140,000 (20,000) $155,500 $ 19,025 50,000 84,500 1,975 $155,500 (52,000) $170,500 $ 26,125 50,000 84,500 9,875 $170,500 (79,200) $198,760 $29,263 50,000 84,500 34,997 $198,760 Current liabilities Notes payable Common stock Retained earnings These financial statements are audited for the first time at the beginning of 2020, and the following facts are discovered: • The company has not made any allowance for noncollection of accounts receivable. An allowance of 1% of total sales is considered appropriate. Uncollectible accounts of $630 should have been written off in 2019. • The notes payable are to officers of the company and have an interest rate of 12%. They were issued on January 1, 2017. No interest has been accrued or paid. (Assume simple interest and no compounding.) • The company has been using MACRS over a 5-year life for both financial reporting and income tax purposes. It has been decided that the straight-line method should have been used for financial reporting, based on an economic life of 10 years and a zero residual value, with a full year's depreciation being recorded in the year of acquisition. No disposals of property, plant, and equipment have occurred. • After adjustments, with the exception of depreciation, expenses deducted for financial accounting purposes are the same as those deducted for income tax purposes. • The company is subject to a 21% income tax rate and tax's its taxes at the end of each year. Required: 1. Prepare the financial statements for 2017, 2018, and 2019 that the company would issue at the beginning of 2020. 2. Next Level Describe what method the company would use to account for each item if the financial statements for all 3 years had been publicly issued previously. Jackson Company has decided to issue common stock to the public in 2020. This will be the first public sale, and therefore, the company will issue its first publicly available financial statements since it was formed in 2017. The financial statements that it has prepared for its own use follow: Income Statements For Years Ended December 31, 2017 2018 2019 Sales Cost of goods sold Gross profit Other expenses Income before income taxes $100,000 (35,000) $ 65,000 (62,500) $ 2,500 (525) $ 1,975 $130,000 (45,000) $ 85,000 (75,000) $ 10,000 (2,100) $ 7,900 $180,000 (65,000) $115,000 (83,200) $ 31,800 (6,678) $ 25,122 Income tax expense Net income Balance Sheets December 31 2017 2018 2019 Cash Accounts receivable Inventory Equipment Less: Accumulated depreciation $ 5,500 30,000 40,000 100,000 $ 12,500 50,000 60,000 100,000 $ 9,960 63,000 65,000 140,000 (20,000) $155,500 $ 19,025 50,000 84,500 1,975 $155,500 (52,000) $170,500 $ 26,125 50,000 84,500 9,875 $170,500 (79,200) $198,760 $29,263 50,000 84,500 34,997 $198,760 Current liabilities Notes payable Common stock Retained earnings These financial statements are audited for the first time at the beginning of 2020, and the following facts are discovered: • The company has not made any allowance for noncollection of accounts receivable. An allowance of 1% of total sales is considered appropriate. Uncollectible accounts of $630 should have been written off in 2019. • The notes payable are to officers of the company and have an interest rate of 12%. They were issued on January 1, 2017. No interest has been accrued or paid. (Assume simple interest and no compounding.) • The company has been using MACRS over a 5-year life for both financial reporting and income tax purposes. It has been decided that the straight-line method should have been used for financial reporting, based on an economic life of 10 years and a zero residual value, with a full year's depreciation being recorded in the year of acquisition. No disposals of property, plant, and equipment have occurred. • After adjustments, with the exception of depreciation, expenses deducted for financial accounting purposes are the same as those deducted for income tax purposes. • The company is subject to a 21% income tax rate and tax's its taxes at the end of each year. Required: 1. Prepare the financial statements for 2017, 2018, and 2019 that the company would issue at the beginning of 2020. 2. Next Level Describe what method the company would use to account for each item if the financial statements for all 3 years had been publicly issued previously.
Expert Answer:
Answer rating: 100% (QA)
Answer Explanation iAccounting principles are the general rules and guidelines that must be followed when preparing financial statements ii Changes in ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
Students also viewed these accounting questions
-
The Jackson Company has decided to issue common stock to the public in 2008. This will be the first public sale and therefore the company will issue its first publicly available financial statements...
-
The Arkade Company has decided to use a 15 percent allowance factor based on job time. Calculate the standard time for each work element and for the totaljob. Mean Observed Time minutes 1.20 1.00...
-
The Pilot Pen Company has decided to use 15 test markets to examine the sensitivity of demand for its new product to various prices, as shown in the following table. Advertising effort was identical...
-
Construct a multilevel bill of material for product Z. How many Us are needed to make each Z? How many Ws are needed to make eachZ? Z. (2) (3) (2) (1) (1) (4)
-
Calculate the pH values and draw the titration curve for the titration of 500 mL of 0.010 M acetic acid (pKa 4.76) with 0.010 M KOH.
-
The following is the pre closing trial balance for Allen University as of June 30, 2017. Additional information related to net assets and the statement of cash flows is also provided. Additional...
-
Consider the gasoline mileage data in Table B.3. a. Fit a multiple linear regression model relatmg gasoline mileage $y$ (miles per gallon) to engine displacement $x_{1}$ and the number of carburetor...
-
CEO was convinced by his employee, M. Ploy, that a coworker, A. Cused, had been stealing money from the company. At lunch that day in the company cafeteria, CEO discharges Cused from her employment,...
-
SDJ, Incorporated, has net working capital of $3,320, current liabilities of $4,550, and inventory of $4,600. a. What is the current ratio? b. What is the quick ratio?
-
Damon Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Damon Manufacturing's operations: Current Assets as of December 31 (prior...
-
A farmer needs to move water from two irrigation ponds to a 10acre vegetable garden (Figure 1). He has 4500ft of drip line (irrigation pipe) running across his 10acres. The client needs 0.34 gallon...
-
LaBella Inc.'s direct materials cost is $154,300, direct labor cost is $888,700, indirect materials cost is $1,250, indirect labor cost is $1,000, and other factory overhead costs are $15,700. What...
-
Two partners each have a 50% interest in the partnership's capital and profits. The December 31, Year 3, balance sheet for the partnership is listed below. Adjusted Basis Fair Market Value Cash $...
-
In 2022, vxtunarflagi hf. purchased shares worth 10,000 shares in Suurferir hf. for ISK 215,000 and classified the investment as a financial asset for sale. At year-end 2022, the fair value of the...
-
State the domain of the rational expression. 8 x+3
-
Find all solutions of the equation. 16) 2 cos x-1=0 Solve the equation on the interval [0, 2). 17) sin 2x = 1 44 18) 2 sin2x + sin x-1=0
-
Let ={0,1} and define f:***-* and g,h,k:*-* as follows: f(v,u) = uv for all v,u * g(w) = f(01,w) h(w) = f(10,w) k = goh What is g(110)? What is h(110)? What is k(110)?
-
An example of prescriptive analytics is when an action is recommended based on previously observed actions. For example, an analysis might help determine procedures to follow when new accounts are...
-
Situation During 2007, one of the customers of Klote Company declared bankruptcy. This customer had been a major purchaser of Klotes products and had owed $40,000 on account to Klote (a material...
-
Define expenses. Of what are expenses a measurement?
-
James Kimberley, president of National Motors, receives a bonus of 10% of Nationals profits after his bonus and the corporations income taxes are deducted. Nationals effective income tax rate is 30%....
-
Consider the following observations: a. Fit the nonlinear regression model \[ y=\theta_{1} e^{\theta_{2} x}+\varepsilon \] to these data. Discuss how you obtained the starting values. b. Test for...
-
For the models shown below, determine whether it is a linear model, an intrinsically linear model, or a nonlinear model. If the model is intrinsically linear, show how it can be linearized by a...
-
Sketch the expectation function for the logistic growth model (12.34) for \(\theta_{1}=1, \theta_{3}=1\), and values of \(\theta_{2}=1,4,8\), respectively. Overlay these plots on the same \(x-y\)...
Study smarter with the SolutionInn App