**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 send it as an
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346 Homework 02
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 $100,000 $75,000 $100,000
$0
$100,000
$100,000
$0
$100,000 Contract Price
Gross Profit Percentage
$100,000 Check Figures $100,000 100% 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
100%
$100,000
$0
$100,000 (assume that all cashflows occur at the end of year 1)
Year 1
$100,000
$100,000
7.50%
$93,023 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 $0 Basis
Selling Exp.
GAIN REALIZED $0 Less: GAIN RECOGNIZED
Gain Realized
Ordinary Income (deprec. recapture)
Gross Profit $75,000 $0
$0
$0 Selling Price
Debt Relief $0
$0
$0 Contract Price
Gross Profit Percentage
$0 $0 #DIV/0! Year 1
Downpayment
Gross profit % #DIV/0!
#DIV/0!
$0 Ordinary income
Profit #DIV/0! Year 2
Installment
Gross profit %
Profit #DIV/0!
#DIV/0!
#DIV/0! $75,000 NET PV OF AFTER-TAX WEALTH
Beginning
Year 1
Amount realized
Interest received
- Tax liability (@20%)
After-Tax Cash
Discount Rate
NPV of After-Tax Cash
Check Figures Beginning End of Year
Year 2
2 Totals $89,800
7.50%
$83,953
$40,930 Page 3 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)
$1,800,000
$2,400,000 As Reported on Return
Year 1
Year 2
$1,800,000
$3,000,000
33%
$2,400,000
(1,800,000)
$600,000
$600,000 $4,800,000
(3,000,000)
$1,800,000
$1,800,000 Total Actual
$7,200,000
(4,800,000)
$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
$2,400,000
$(1,600,000)
(1,900,000)
$(300,000)
$800,000
$500,000
$(300,000)
35%
35%
35%
$280,000
$175,000
$(105,000)
5%
$(5,250) Check Figures $5,250 ...

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