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what would be the income tax expense reporting on the face of the income statement from Lantos Company that has 20 percent tax rate, sales revenue $1000000, cogs $60000, sales and wages expense $80000, dividend revenue $90000 etc
- what would be the income tax expense reporting on the face of the income statement from Lantos Company that has 20 percent tax rate, sales revenue $1000000, cogs $60000, sales and wages expense $80000, dividend revenue $90000 etc..
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In his famous book The Wealth of Nations, Adam Smith argues that:
a. producers are motivated by pride
b. economic agents are motivated by rational self-interest
c. producers are motivated by wishing to maximise welfare in society
d. welfare is maximised by minimising selfishness
e. business profits at consumers expense
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The shareholders’ equity account balance of Guide Corporation as of December 31, 2019 are as follows:
Ordinary share, P100 par, 50,000 shares
Authorized, 25,000 shares issued P2,500,000
Share Premium 500,000
Accumulated Profits/Retained earnings 1,000,000
Treasury shares, 2,000 shares at cost ( 320,000)
Total P3,680,000
On January 2, 2020, Guide sold the treasury shares on the open market at P200 per share.
What is the effect on the shareholders’ equity as a result of the sale of treasury shares?
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On September 1, 2019, Valdez Company reacquired 12,000 shares of its P10 par value ordinary shares for P15 per share. Valdez uses the cost method to account for treasury shares. The journal entry to record the reacquisition of the stock should debit:
a. Treasury Shares for P120,000.
b. Ordinary shares for P120,000.
c. Ordinary Shares for P120,000 and Premium shares in Excess of Par for P60,000.
d. Treasury Shares for P180,000.
Expert Solution
1. Calculation of income tax expenses
| Particulars | Amounts $ |
| Sales Revenue | 1,000,000 |
| Dividend Revenue | 90,000 |
| Total Revenue. | 1,090,000 |
| Less: Cost of goods sold | 60,000 |
| Less:Sales and wages expenses | 80,000 |
| Income before tax | 950,000 |
| Income tax Expenses 950,000*20% | 190,000 |
2. In his famous book The Wealth of Nations, Adam Smith argues that:
| a. |
producers are motivated by pride |
|
| b. |
economic agents are motivated by rational self-interest |
|
| c. |
producers are motivated by wishing to maximise welfare in society |
|
| d. |
welfare is maximised by minimising selfishness |
|
| e. |
business profits at consumers expense |
Sol: The correct option is b (economic agents are motivated by rational self-interest)
- According to Adam Smith, he argued in his famous book " The Wealth of Nations" that people should be given freedom to produce and exchange the goods and services in both domestic and foreign market as of their interest because it promotes self interest to produce and earn, which ultimately gives motivation and prosperity.
- Strict rules and regulations restricts people's activity and ultimately slows down their interest in producing.
3.
Journal For Sale of Treasury Stock :
Cash = Debit $ 400,000
Treasury Stock = Credit $ 320,000
Paid in Capital for Treasury Stock = Credit $ 80,000
The effect of Treasury Stock on Shareholder's Equity is as follows :
Shares issued = $ 2,500,000
Share Premium = $ 500,000
Accumulated Profit / Retained Earnings = $ 1,000,000
Paid in Capital on Treasury Stock = $ 80,000
Total Shareholder's Equity = $ 4,080,000
Hence, Shareholder's Equity increased = $ 4,080,000 - $ 3,680,000 = $ 400,000
4.
The correct answer is D. Treasury Share for P180,000
(12,000 x P15)
Explanation: When compnay reacquired shares more thanits par value and the account that follows cost method then total value to be debited to treasury shares.
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