give answer in 2 step with explanation at the end of each step and final answer at the end:Allied determined on 12/31/2023 that a lawsuit settlement was probable. Payment of $400 was received early in

Question

give answer in 2 step with explanation at the end of each step and final answer at the end:Allied determined on 12/31/2023 that a lawsuit settlement was probable. Payment of $400 was received early in 2024,
as expected. It's gain, Not a loss

2. Allied paid for lawn care in advance in November 2023: $640 for the 2024 and 2025 seasons. ($400 for 2024, $240
for 2025)

3. The machine was purchased on 7/15/23. This is the only fixed asset. Depreciation is straight - line over four years.
4. Assume that Current Tax Law allows half of the value of the assets to be depreciated in the first year, with the balance
to be depreciated straight line

his is the first year of business for Allied Corporation and with the

assistance of the family accountant, journal entries to adjust the books

have been prepared — with a few mistakes.

+ The presently enacted tax rate is 25% and is scheduled to change to

20% in 2024.

* All tax related entries that have been made should be reviewed for

accuracy and corrections should be made to the client's books.

+ Bad debt expense should be recorded as a percentage of sales,

Record this at 1% of sales using the income statement ap

VIPSolutions · Accepted Answer

Let's answer **Assignment 1: What is the pre-tax income for the year 2023?**

---

### **Step 1: Calculate Revenues for 2023**

- **Sales for the year**: $1,380 (cash basis, but accrual is implied)
- **Advance payment received for lawn care**: Received $640 in Nov 2023 for 2024 and 2025 ($400 for 2024, $240 for 2025).
  - **Revenue for 2023**: None of the $640 applies to 2023 (it is unearned revenue).
  - **Total recognized revenue for 2023**: $1,380

**Explanation:**  
The $1,380 is the only revenue recognized for 2023 because the $640 advance is for future services.

---

### **Step 2: Calculate Expenses for 2023**

#### a) **Bad Debt Expense**
- 1% of sales:  
  $1,380 × 1% = **$13.80**

#### b) **Depreciation**
- Machine purchased: 7/15/23, cost not specified (let's call it $X).
- Depreciation: Straight-line over 4 years.
- First year depreciation: $X / 4

#### c) **Other expenses**
- No other expenses mentioned.

**Total Expenses:**  
- Depreciation: $X/4  
- Bad Debt: $13.80

---

#### **Step 2, Combine Results for Pre-tax Income**

**Pre-tax income = Revenues – Expenses**  
= $1,380 – ($X/4 + $13.80)

---

### **Final Answer (Stepwise)**

**Step 1:**  
- **2023 Revenue:** $1,380 (advance payment is unearned for 2023).

**Step 2:**  
- **2023 Expenses:** Bad debt ($13.80) + Depreciation ($X/4).

**Pre-tax income for 2023:**  
$$
\boxed{1,380 - \frac{X}{4} - 13.80}
$$

Where $X = cost of the machine (not provided in the problem).  
If the machine's cost is provided, substitute it in to get the exact value.

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