Use this information for the following two questions.

Ship-Builders Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2018 and completed construction of the ship on March 31, 2019. To help finance construction, Ship-Builders took out an $8,200,000, 2-year, 7% loan on January 1, 2018. Interest on the loan was to be paid annually at the end of each year and the principal at the end. Ship-Builders has no other outstanding interest-bearing debt. Ship-Builders made the following expenditures in conjunction with this construction project:

A-How much interest should Ship-Builders Co. capitalize in 2018?

B-How much interest should Ship-Builders Co. expense in 2018?

Rockstar Carpet Outlet wants to develop a method to forecast its carpet sales. The manager believes that the store’s sales are related to the number of new housing starts in the area and has gathered data of construction permits from the county records and from store sales.

1. Develop a linear regression model relating sales in a period to construction permits in the current or previous periods. What is the strength of the causal relationship between monthly sales and new construction permits for the same month?
2. Develop other linear regression models for different lagged months? What do you conclude?
3. What are the sales forecasts the next two months? How would you forecast sales for the next six months?

USE EXCEL AND SHOW EXCEL FORMULAS PLEASE

A building company has been awarded the contract to undertake the construction works for a multi-storey office project in a city centre location. A deep basement is to be installed under one half of the building, within a layer of dense gravel.

The site is surrounded by public roads and buildings on all sides and it is expected that the water table is extremely close to the ground surface on a year-round basis.

You have been asked by the contractor to advise their company with regard to a number of issues on the project, in advance of the construction works.

1. (a) What details would you provide to the contractor in relation to the options and methods available to dewater the soil on the project, to facilitate both the basement construction and trench excavations for utility ducting installation on the site? How would the range of dewatering methods be combined to produce a suitable solution?

2. (b) Given the basic information available in relation to the location and ground conditions on this site, describe the particular options that you would recommend to the contractor for use on this specific site to assist in supporting the sides of the deep excavations during the basement construction.

Bonita Industries is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6552000 on March 1, $5280000 on June 1, and $8450000 on December 31. Bonita Industries borrowed $3180000 on January 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 8%, 3-year, $6410000 note payable and an 9%, 4-year, $12150000 note payable.

What are the weighted-average accumulated expenditures?
a.20282000 b.8540000 c.9992000 d.11832000

Waterway Industries is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6310000 on March 1, $5350000 on June 1, and $8750000on December 31. Waterway Industries borrowed $3180000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6450000 note payable and an 11%, 4-year, $12650000 note payable.

What is the actual interest for Waterway Industries?
a.935831 b.2450100 c.2022500 d.2418100

Oriole Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6450000 on March 1, $5250000 on June 1, and $8950000 on December 31. Oriole Company borrowed $3220000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6390000 note payable and an 11%, 4-year, $12650000 note payable.

What amount of interest should be charged to expense?

a.2036500 b.1087912 c.1176712 d.1474314

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,100,000. During 2018, costs of $2,040,000 were incurred, with estimated costs of $4,040,000 yet to be incurred. Billings of $2,548,000 were sent, and cash collected was $2,290,000. In 2019, costs incurred were $2,548,000 with remaining costs estimated to be $3,660,000. 2019 billings were $2,798,000, and $2,515,000 cash was collected. The project was completed in 2020 after additional costs of $3,840,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time. Required: 1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. 2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred). 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

2018/

2019/

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,100,000. During 2018, costs of $2,040,000 were incurred, with estimated costs of $4,040,000 yet to be incurred. Billings of $2,548,000 were sent, and cash collected was $2,290,000.

In 2019, costs incurred were $2,548,000 with remaining costs estimated to be $3,660,000. 2019 billings were $2,798,000, and $2,515,000 cash was collected. The project was completed in 2020 after additional costs of $3,840,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time.

Required:
1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.
2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

2018/

2019/

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,100,000. During 2018, costs of $2,040,000 were incurred, with estimated costs of $4,040,000 yet to be incurred. Billings of $2,548,000 were sent, and cash collected was $2,290,000.

In 2019, costs incurred were $2,548,000 with remaining costs estimated to be $3,660,000. 2019 billings were $2,798,000, and $2,515,000 cash was collected. The project was completed in 2020 after additional costs of $3,840,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time.

Required:
1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.
2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

2018/

2019/

According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 8.1 percent between 2012 and 2013.

Required:

1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2013. (Decreases should be indicated by a minus sign. Round your percentage answers to 1 decimal place.)

2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. (Round your percentage answers to 1 decimal place.)

2-b. Excluding income tax, interest, and operating expenses, did Computer Tycoon earn more profit per dollar of sales in 2013 compared to 2012?

1. Vertical Analysis of Income Statement

   Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:

   	Current Year		Previous Year
   Sales	$580,000		$522,000
   Cost of goods sold	324,800		261,000
   Selling expenses	104,400		104,400
   Administrative expenses	110,200		93,960
   Income tax expense	17,400		26,100

   a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

   Innovation Quarter Inc.
   Comparative Income Statement
   For the Years Ended December 31
   	Current year Amount	Current year Percent	Previous year Amount	Previous year Percent
   Sales	$580,000	%	$522,000	%
   Cost of goods sold	324,800	%	261,000	%
   Gross profit Income from operations Net income Total operating expenses	$	%	$	%
   Selling expenses	104,400	%	104,400	%
   Administrative expenses	110,200	%	93,960	%
   Gross profit Income from operations Net income Total operating expenses	$	%	$	%
   Gross profit Income from operations Net income Total operating expenses		%		%
   Income tax expense	17,400	%	26,100	%
   Gross profit Income from operations Net income Total operating expenses	$	%	$	%

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   b. The vertical analysis indicates that the cost of goods sold as a percent of sales

   • increased
   • decreased
   by 6 percentage points, while selling expenses
   • increased
   • decreased
   by 2 percentage points, and administrative expenses
   • increased
   • decreased
   by 1 percentage points. Thus, net income as a percent of sales
   • increased
   • decreased
   by 3 percentage points.

During fiscal year 2019, the voters of the City of Bingham approved the issuance of 3 percent tax-supported serial bonds in the face amount of $7,500,000 to construct and equip an annex to the City Hall. The bonds are to mature in blocks of $312,500 every six months over a 12-year period commencing January 1, 2021.

Required

1. Prepare general journal entries as necessary to record the following transactions in the general journals of the City Hall Annex Construction Fund and, if applicable, in the governmental activities general journal at the government-wide level. Do not record entries at this time in any other affected funds; those entries will be made in later chapters of this cumulative problem that cover those funds. Use account titles listed under the drop-down [Account] menu. Be sure the year 2020 is selected from the dropdown [Year] menu and the appropriate paragraph number shown in bold-face font below is in the [Description] field.

1. [Para. 5a-1] On the first day of the 2020 fiscal year (January 1, 2020), the bond issue was sold at 101. Cash in the face amount of the bonds, $7,500,000, was deposited in the City Hall Annex Construction Fund; the premium was deposited in the debt service fund, as required by state law.  

Required: Record these transactions in the City Hall Annex Construction Fund and governmental activities journals. (Hint: In addition to recording the liability for 3% serial bonds payable in the governmental activities journal, you should record the premium on the bonds payable [credit Premium on Serial Bonds Payable] in the governmental activities general journal.) Wait until instructed in Chapter 6 to make the corresponding entry in the debt service fund.

2. [Para. 5a-2] The city invested $5,000,000 of the bond proceeds in 90-day notes.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals.

3. [Para. 5a-3] The City Hall Annex Construction Fund purchased land for the annex for $450,000. This amount was vouchered.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. In the governmental activities general journal at the government-wide level, this purchase should be debited to Land. (Note: This transaction was not encumbered.)

4. [Para. 5a-4] A contract for architectural services was signed at an estimated amount of $350,000 for the design of the City Hall Annex.

Required: Record the encumbrance in the City Hall Annex Construction. This transaction has no effect at the government-wide level.

5. [Para. 5a-5] Legal and other capitalizable costs of the bond issue were vouchered in the amount of $165,000.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. (Note: This transaction was not encumbered.)

6. [Para. 5a-6] Preliminary plans were received (related to the contract signed in paragraph 5a-4) for which architectural fees of $103,000 were vouchered.

Required: Eliminate the encumbrance and record a Vouchers Payable liability in the City Hall Annex Construction Fund and governmental activities journals, as appropriate.

7. [Para. 5a-7] Construction bids were opened and analyzed. A contract was signed with the firm that submitted the winning bid of $6,000,000. A provision of the contract permits the city to withhold 5 percent of payment pending final acceptance of the completed project.

Required: Record the signing of the contract in the City Hall Annex Construction Fund general journal. This transaction has no effect at the government-wide level.

8. [Para. 5a-8] Vouchers payable were recorded in the amount of $240,000 for the final architectural plans and specifications for the construction project (see para. 5a-4).

Required: Eliminate the remaining encumbrance for the architectural services and record a Vouchers Payable liability in the City Hall Annex Construction Fund and governmental activities journals, as appropriate.

9. [Para. 5a-9] The 90-day notes matured, paying $37,500 in interest (see para. 5a-2).

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. The interest should be recorded as general revenue in the governmental activities journal.

10. [Para. 5a-10] The contractor submitted a billing for $3,000,000. This amount was recorded as a contract payable.