Homework 05 - Intro The three worksheets that follow provide pro forma workpapers to help you solve the assigned homework problems They organize your

Homework 05 - Intro The three worksheets that follow...

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Unformatted text preview: Intro The three worksheets that follow provide pro forma workpapers to help you solve the assigned homework problems. They organize your solution in a manner that is consistent with the analytical methods that we discuss in class and allow you to focus on the technical issues, rather than workpaper techniques and computer skills. However, you should continuously analyze the organization of the solution and the answers that you receive, as you work the problems. That is the only way that you will learn the skills and is the only that you will learn the skills and techniques that you will need for your long-term success. You should also refrain from checking the correct answers until after you have completed your solution. Click on the appropriate tab below to move to the worksheet for the homework problem that you want to work on. Once you have completed the assignment, save the file to your computer, then submit it in the manner prescribed in the course syllabus. NOTE: Cells with red dots in them contain notes that provide additional information about the cell contents. Double click on those cells to read the notes. Also, you need enter information only in the cells that are highlighted in bright yellow. Page 1 18-40a Installment Sales Prob. 18-40 Only One Payment GAIN REALIZED Cash Received Downpayment Installments Debt Relief AMOUNT REALIZED Less: Basis Selling Exp. GAIN REALIZED GAIN RECOGNIZED Gain Realized Ordinary Income (deprec. recapture) Gross Profit Selling Price Debt Relief $100,000 $0 $0 $100,000 ($25,000) $0 $75,000 $75,000 $75,000 $0 $75,000 $100,000 $0 $100,000 Contract Price Gross Profit Percentage $75,000 Check Figures $100,000 75% Year 1 Payment Received Gross profit % Ordinary income GAIN RECOGNIZED NET PV OF AFTER-TAX WEALTH Amount realized Interest received - Tax liability (@25%) After-Tax Cash Discount Rate NPV of After-Tax Cash $100,000 75% $75,000 $0 $75,000 (assume that all cashflows occur at the end of year 1) Year 1 $100,000 $0 ($18,750) $81,250 7.50% $75,581 Page 2 $81,250 $75,581 18-40b Installment Sales Prob. 18-40 Two Payments GAIN REALIZED Cash Received Check Figures Downpayment Installments Debt Relief AMOUNT REALIZED $50,000 $50,000 $0 $100,000 Basis Selling Exp. GAIN REALIZED ($25,000) $0 $75,000 Less: GAIN RECOGNIZED Gain Realized Ordinary Income (deprec. recapture) Gross Profit $75,000 $75,000 $0 $75,000 Selling Price Debt Relief $100,000 $0 $100,000 Contract Price Gross Profit Percentage $75,000 $100,000 75% Year 1 Downpayment Gross profit % Ordinary income Profit $50,000 75% $37,500 $0 $37,500 Year 2 Installment Gross profit % Profit $50,000 75% $37,500 $75,000 $75,000 NET PV OF AFTER-TAX WEALTH Beginning Beginning End of Year Year 1 Year 2 2 Amount realized $50,000 $50,000 Interest received $0 $6,000 - Tax liability (@20%) $0 $7,500 $8,700 After-Tax Cash $50,000 ($7,500) $47,300 Discount Rate 7.50% NPV of After-Tax Cash $46,512 ($6,490) $40,930 Check Figures $40,930 Page 3 Totals $100,000 $6,000 $16,200 $89,800 $89,800 $80,952 $83,953 Percentage of Completion Total Contract Contract Price -Contract Costs Net Income Costs Incurred Percentage Completed in Year Revenue Recognized -Contract Costs Net Income Check Figures Prob. 18-50 parts a & b TOTAL Estimated Actual $7,200,000 $7,200,000 $5,400,000 $4,800,000 $12,600,000 $12,000,000 As Reported on Return Year 1 Year 2 $1,800,000 $3,600,000 -33% $2,400,000 (1,800,000) $600,000 $600,000 $5,400,000 (3,600,000) $1,800,000 $1,800,000 Total Actual $7,800,000 (5,400,000) $2,400,000 Lookback Interest Revenue Recognized -Expenses Recognized Profit Tax Rate Tax Liability Federal Interest Rate Interest Due Year 1 Tax Year 1 "Actual" Underpayment Reported $2,400,000 $2,700,000 $300,000 0 0 $$2,400,000 $2,700,000 $300,000 35% 35% 35% $840,000 $945,000 $105,000 5% $5,250 Check Figures $5,250 ...
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  • Spring '13
  • WILSON
  • Accounting, Generally Accepted Accounting Principles, 1 year, $75,581 18, $81,250 7.50, $300,000 0 0

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