Level of Learning: 2 Medium Learning Objective: 01-03 Learning Objective: 01-05 Topic Area: Development of accounting and reporting standards Topic Area: Encouraging high-quality financial reporting Blooms: Remember AACSB: Reflective thinking AICPA: BB Critical Thinking AICPA: BB Legal Problems Use the following to answer questions 117 and 118: Alpaca Corporation had revenues of $200,000 in its first year of operations. The company has not collected on $20,000 of its sales and still owes $25,000 on $70,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $15,000 in salaries. Owners invested $20,000 in the business and $20,000 was borrowed on a five-year note. The company paid $2,000 in interest that was the amount owed for the year, and paid $6,000 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%. 117. Compute net income for the first year for Alpaca Corporation. Answer: Revenues $200,000 Expenses: Cost of goods sold 70,000 Salaries 15,000 Interest 2,000 Insurance 3,000 90,000 Income before tax 110,000 Income tax at 40% 44,000 Net income $ 66,000 Level of Learning: 3 Hard Learning Objective: 01-02 Topic Area: Cash versus accrual accounting Blooms: Apply AACSB: Knowledge application AICPA: BB Critical thinking FN Measurement 118. Compute the cash balance at the end of the first year for Alpaca Corporation. Answer: Cash receipts: revenue $200,000 Less: Accounts receivable 20,000 $180,000
Level of Learning: 2 Medium Learning Objective: 01-03 Learning Objective: 01-05 Topic Area: Development of accounting and reporting standards Topic Area: Encouraging high-quality financial reporting Blooms: Remember AACSB: Reflective thinking AICPA: BB Critical Thinking AICPA: BB Legal Problems Use the following to answer questions 117 and 118: Alpaca Corporation had revenues of $200,000 in its first year of operations. The company has not collected on $20,000 of its sales and still owes $25,000 on $70,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $15,000 in salaries. Owners invested $20,000 in the business and $20,000 was borrowed on a five-year note. The company paid $2,000 in interest that was the amount owed for the year, and paid $6,000 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%. 117. Compute net income for the first year for Alpaca Corporation. Answer: Revenues $200,000 Expenses: Cost of goods sold 70,000 Salaries 15,000 Interest 2,000 Insurance 3,000 90,000 Income before tax 110,000 Income tax at 40% 44,000 Net income $ 66,000 Level of Learning: 3 Hard Learning Objective: 01-02 Topic Area: Cash versus accrual accounting Blooms: Apply AACSB: Knowledge application AICPA: BB Critical thinking FN Measurement 118. Compute the cash balance at the end of the first year for Alpaca Corporation. Answer: Cash receipts: revenue $200,000 Less: Accounts receivable 20,000 $180,000
Spiceland9e_TB_01.docx