See Attachment
Accounting Exercise 1. A furniture manufacturer sells a couch for $1,000. The sales tax is included in the price and is $100, and the total profit is $200. What is the transaction price? 2. On January 1, 2021, Dotdash enters into a 10-year lease of an asset. •Lease payments are due on January 1 at $50,000 per year during the initial 10-year term payable at the beginning of each year. •Dotdash makes the first $50,000 on January 1, 2021. •Dotdash incurs initial direct costs of $15,000 related to commissions paid. •The rate that the lessor charges the lessee is not readily determinable. Dotdash’s incremental borrowing rate is 5.87 percent, which reflects the fixed rate at which Dotdash could borrow a similar amount in the same currency, for the same term, and with similar collateral as in the lease. Assuming the lease is an operating lease, what is lease expense for 2021? What is the right-of-use asset balance at 12/31/2021? What is the current and long-term portion of the lease liability at 12/31/2021? 3. In preparing its cash flow statement for the year ended December 31, 2020 Dotdash collected the following data: •Depreciation/amortization expense: 110,000 •Gain on sale of land: 60,000 •Decrease in accounts payable: 50,000 •Sale of land: 210,000 •Purchase of equipment: 250,000 •Issuance of common stock: 300,000 •Payment of dividends: 95,000 What amount should Dotdash report as net cash used in investing activities in its December 31, 2020 statement of cash flows? 4. On December 31, 2020 Dotdash decided to end operations and dispose of its assets within three months. At December 31, 2020 the net realizable value of the equipment was below historical cost. What is the appropriate measurement basis for the equipment included in Dotdash’s December 31, 2020 balance sheet? What should the remaining estimated useful life be of the equipment at December 31, 2020? •Historical cost •Current reproduction cost •Net realizable value •Current replacement cost 5. During 2019 Dotdash became involved in a tax dispute with New York State. At December 31, 2019 Dotdash’s tax advisor believed an unfavorable outcome was probable. A reasonable estimate of the additional taxes was $200,000 but could be as much as $300,000. After the financial statements were issued Dotdash received and accepted a settlement offer of $275,000. What amount of accrued liability should Dotdash have reported in its December 31, 2019 balance sheet? 6. During Dotdash’s March 2020 close, the accounting team identified in the AP subledger a $60,000 invoice for services dated from March 1, 2020 through February 28, 2021 which was not paid. AP coded the invoice to prepaid in accordance with Dotdash’s prepaid policy. As a result, recorded in the GL as of March 2020 pertaining to this invoice is the following: AccountDebitCredit Prepaid Expense $60,000 Accounts Payable$60,000 The AP subledger is closed. What reclass entries would be booked during March 2020 close, if any, to appropriately account for the prepaid and corresponding expense. If no entry is required, please provide reasoning. 7. Dotdash is involved with many legal firms and legal matters (i.e. general legal, trademark, immigration, and employment) in the normal day to day business. Dotdash is working on establishing a monthly close process to ensure legal accruals during close are complete and accurate. Per the close schedule, AP subledger closes on business day -3 and the last day to book entries is business day 3. Please briefly explain a legal accrual process to appropriately accrue legal expenses monthly for a high number of firms and open legal matters while meeting the close deadline of business day 3.