Selk Steel Co., which began operations on January 4, 2017, had the following subsequent transactions and events in its long-term investments.
   

2017

2018

2019

Problem 15-4A Part 2

Part 2
Assume that although Selk owns 20% of Kildaire’s outstanding stock, circumstances indicate that it does not have a significant influence over the investee and that it is classified as an available-for-sale security investment.

Required:
1. Prepare journal entries to record the preceding transactions and events for Selk. Also prepare an entry dated January 2, 2019, to remove any balance related to the fair value adjustment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

PERCENTAGE OF COMPLETION METHOD AttiK Construction Company currently has a long-term construction project. The project has a contract price of $130,000,000 with total estimated costs of $100,000,000. AttiK appropriately uses the percentage of completion method. After 2 years of construction, the following costs have been accumulated: Actual cost incurred, Year 1 $30,000,000 Total estimated costs remaining after Year 1 70,000,000 Actual cost incurred, Year 2 50,000,000 Total estimated cost remaining after Year 2 20,000,000 Determine the gross profit for each of the first 2 years of the construction contract.

1. Prepare a memo for the management of Tesla Motors:
   1. Which considers the limitations in the use of a traditional budgetary control system in their modern workplace

3-3

Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2017, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items athrough h that require adjusting entries on December 31, 2017, follow.

1. An analysis of WTI's insurance policies shows that $3,996 of coverage has expired.
2. An inventory count shows that teaching supplies costing $3,464 are available at year-end 2017.
3. Annual depreciation on the equipment is $15,986.
4. Annual depreciation on the professional library is $7,993.
5. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $3,000, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2018.
6. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,861 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)
7. WTI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee.
8. The balance in the Prepaid Rent account represents rent for December.

2-a. Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts.
2-b. Prepare an adjusted trial balance.

Post the balance from the unadjusted trial balance and the adjusting entries in to the T-account

-a. Prepare Wells Technical Institute's income statement for the year 2017.
3-b. Prepare Wells Technical Institute's statement of owner's equity for the year 2017.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31, 2017.
  

The following selected transactions were taken from the books of Ripley Company for 2018:
1.   On February 1, 2018, borrowed $70,000 cash from the local bank. The note had a 6 percent interest rate and was due on June 1, 2018.
2.   Cash sales for the year amounted to $240,000 plus sales tax at the rate of 7 percent.

3.   Ripley provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 1 percent of sales.
4.   Paid the sales tax to the state sales tax agency on $210,000 of the sales.

5.   Paid the note due on June 1 and the related interest.

6.   On November 1, 2018, borrowed $20,000 cash from the local bank. The note had a 6 percent in-
terest rate and a one-year term to maturity.

7.   Paid $2,100 in warranty repairs.

8.   A customer has filed a lawsuit against Ripley for $1 million for breach of contract. The company
attorney does not believe the suit has merit.
Required
a.   Answer the following questions:
(1) (2) (3)
What amount of cash did Ripley pay for interest during 2018?

What amount of interest expense is reported on Ripley’s income statement for 2018?

What is the amount of warranty expense for 2018?

b.   Prepare the current liabilities section of the balance sheet at December 31, 2018.

c. Show the effect of these transactions on the financial statements using a horizontal statements model like the one below. Use + for increase, − for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity
(IA), or financing activity (FA).

a. (1)     Cash paid for interest:       $. x % x /12 =

     (2)     Interest Expense:    $            x   % x  /12 =     $

                                               $            x   % x  /12 =                    

                                               Total Interest Expense   $

     (3)     Warranty Expense:  $                 x    % = $

b.

¹$         x    % x    /12 = $                                       ²$              x     % = $

                                                                                   ³$              x      % = $

⁴$             x % = $

Note:  Is there anything that should not be recorded and why?

Prepare general journal entries without explanations to record the following transactions:

Jan    1     Sold merchandise to Kelly Graham for $1,000 on account. The merchandise cost $600 and the company uses a perpetual inventory system and does not expect any returns.

Feb   1     Received $300 from Graham.

Jul     1     Wrote off the balance of Graham’s account as uncollectible.

Sep   1     Unexpectedly received payment in full from Graham.

Discuss the importance of companies having proper internal controls. Give an example from your experience in which an organization had good or weak controls in place and state why they were good or weak controls.

Your textbook outlines several techniques to gain your reader's attention in the opening of a persuasive message. List two of these techniques and write an original example of each.

The journal of accountancy is written created but which organization?

                a. FASB

                b. IASB

                c. AICPA                                  

                d. SEC

LEASE VERSUS BUY Morris-Meyer Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the required amount. Alternatively, a Nevada investment banking firm that represents a group of investors believes that it can arrange for a lease financing plan. Assume that the following facts apply: The equipment falls in the MACRS 3-year class. The applicable MACRS rates are 33%, 45%, 15%, and 7%.

2. Estimated maintenance expenses are $75,000 per year.

3. Morris-Meyer’s federal-plus-state tax rate is 40%.

4. If the money is borrowed, the bank loan will be at a rate of 15%, amortized in 4 equal installments to be paid at the end of each year.

5. The tentative lease terms call for end-of-year payments of $400,000 per year for 4 years.

6. Under the proposed lease terms, the lessee must pay for insurance, property taxes, and maintenance.

7. The equipment has an estimated salvage value of $400,000, which is the expected market value after 4 years, at which time Morris-Meyer plans to replace the equipment regardless of whether the firm leases or purchases it. The best estimate for the salvage value is $400,000, but it may be much higher or lower under certain circumstances.

To assist management in making the proper lease-versus-buy decision, you are asked to answer the following questions.

a. Assuming that the lease can be arranged, should Morris-Meyer lease or borrow and buy the equipment? Explain.

b. Consider the $400,000 estimated salvage value. Is it appropriate to discount it at the same rate as the other cash flows? What about the other cash flows—are they all equally risky? Explain.

On June 30, 2018, Singleton Computers issued 6% stated rate bonds with a face amount of $200 million. The bonds mature on June 30, 2033 (15 years). The market rate of interest for similar bond issues was 5% (2.5% semiannual rate). Interest is paid semiannually (3%) on June 30 and December 31, beginning on December 31, 2018. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds on June 30, 2018. 2. Calculate the interest expense Singleton reports in 2018 for these bonds using the effective interest method.

Required 1

Determine the price of the bonds on June 30, 2018. (Enter your answers in whole dollars. Round percentage answers to one decimal place. Round your final answers to nearest whole dollar amount.)

Required 2

Calculate the interest expense Singleton reports in 2018 for these bonds using the effective interest method. (Enter your answers in whole dollars. Round your final answers to nearest whole dollar amount.)

Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

• Capitalization period: January 1, 2019, to June 30, 2020
• Expenditures on project:

  2019:
  	January 1	$ 516,000
  	May 1	549,000
  	October 1	492,000
  2020:
  	March 1	1,512,000
  	June 30	600,000

• Amounts borrowed and outstanding:
     $1.4 million borrowed at 12%, specifically for the project
     $5 million borrowed on July 1, 2018, at 14%
     $18 million borrowed on January 1, 2017, at 8%

Required:

Note: Round all final numeric answers to two decimal places.

1. Compute the amount of interest costs capitalized each year.

   Capitalized interest, 2019	$ fill in the blank 1
   Capitalized interest, 2020	$ fill in the blank 2

2. If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2020.

   $ fill in the blank 3

3. Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report _________ income than if it had not capitalized interest. In future periods, the same company will report ________ income than if it had not capitalized interest.

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows: 2018 2019 2020 Cost incurred during the year $ 2,044,000 $ 2,628,000 $ 2,890,800 Estimated costs to complete as of year-end 5,256,000 2,628,000 0 Billings during the year 2,170,000 2,502,000 5,328,000 Cash collections during the year 1,885,000 2,600,000 5,515,000 Westgate recognizes revenue over time according to percentage of completion. Required:

A company borrowed $40,000 on June 30, 2016 from a bank. The bank is charging an interest rate of 10% annually. Interest is compounded quarterly. If the loan is due on September 30, 2017, how many times will the company record a journal entry for Interest Expense over the whole loan period?