McWherter Instruments sold $550 million of 10% bonds, dated January 1, on January 1, 2018. The bonds mature on December 31, 2037 (20 years). For bonds of similar risk and maturity, the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $550,000 of the bonds as a long-term investment. (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 issued on January 1, 2018. 2. Prepare the journal entries to record (a) their issuance by McWherter and (b) Blanton's investment on January 1, 2018. 3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2018 (at the effective rate). 4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2018 (at the effective rate).

McWherter Instruments sold $410 million of 10% bonds, dated January 1, on January 1, 2018. The bonds mature on December 31, 2037 (20 years). For bonds of similar risk and maturity, the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $410,000 of the bonds as a long-term investment. (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 issued on January 1, 2018.
2. Prepare the journal entries to record (a) their issuance by McWherter and (b) Blanton's investment on January 1, 2018.
3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2018 (at the effective rate).
4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2018 (at the effective rate).

Cansela Corporation uses a periodic inventory system and the LIFO method to value its inventory. The company began 2018 with inventory of 6,100 units of its only product. The beginning inventory balance of $87,200 consisted of the following layers: 2,600 units at $12 per unit = $ 31,200 3,500 units at $16 per unit = 56,000 Beginning inventory $ 87,200 During the three years 2018–2020, the cost of inventory remained constant at $18 per unit. Unit purchases and sales during these years were as follows: Purchases Sales 2018 19,000 20,000 2019 25,000 27,500 2020 21,000 22,000 Required: 1. Calculate cost of goods sold for 2018, 2019, and 2020. 2. Disregarding income tax, determine the LIFO liquidation profit or loss, if any, for each of the three years. 3. Determine the effects of LIFO liquidation on cost of goods sold and net income for 2018, 2019, and 2020. Cansela’s effective income tax rate is 30%.

Fores Construction Company reported a pretax operating loss of $210 million for financial reporting purposes in 2018. Contributing to the loss were (a) a penalty of $10 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2018 and (b) an estimated loss of $20 million from accruing a loss contingency. The loss will be tax deductible when paid in 2019.

The enacted tax rate is 40%. There were no temporary differences at the beginning of the year and none originating in 2018 other than those described above. Taxable income in Fores’s two previous years of operation was as follows:

Required:
1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2018. Fores elects the carryback option.
2. What is the net operating loss reported in 2018 income statement?
3. Prepare the journal entry to record income taxes in 2019 assuming pretax accounting income is $90 million. No additional temporary differences originate in 2019

Foreign Currency Commitment:

U.S. Corporation entered into a contract on November 1, 2017 to sell two machines to International Company for 750,000 foreign currency units (FCU). The machines were to be delivered and the amount collected on March 1, 2018. In order to hedge its commitment, U.S. entered, on November 1, 2017 , into a forward contract to sell 750,000 FCU on March 1, 2018. The forward contract met all conditions for hedging a foreign currency commitment. Selected exchange rates for FCU at various dates were as follows:

Required: Prepare all journal entries relative to the above on the following dates:

1. November 1, 2017.

2. Year-end adjustments on December 31, 2017.

3. March 1, 2018. (Include all adjustments related to the forward contract)

Fores Construction Company reported a pretax operating loss of $220 million for financial reporting purposes in 2018. Contributing to the loss were (a) a penalty of $15 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2018 and (b) an estimated loss of $30 million from accruing a loss contingency. The loss will be tax deductible when paid in 2019. The enacted tax rate is 40%. There were no temporary differences at the beginning of the year and none originating in 2018 other than those described above. Taxable income in Fores’s two previous years of operation was as follows: 2016 $ 110 million 2017 35 million Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2018. Fores elects the carryback option. 2. What is the net operating loss reported in 2018 income statement? 3. Prepare the journal entry to record income taxes in 2019 assuming pretax accounting income is $95 million. No additional temporary differences originate in 2019.

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Baskin-Robbins is one of the world’s largest specialty ice cream shops. The company offers dozens of different flavors, from Very Berry Strawberry to lowfat Espresso ’n Cream. Assume that a local Baskin-Robbins in Raleigh, North Carolina, has the following amounts for the month of July 2018.

McWherter Instruments sold $500 million of 8% bonds, dated January 1, on January 1, 2018. The bonds mature on December 31, 2037 (20 years). For bonds of similar risk and maturity, the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $500,000 of the bonds as a long-term investment. (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 issued on January 1, 2018. 2. Prepare the journal entries to record (a) their issuance by McWherter and (b) Blanton's investment on January 1, 2018. 3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2018 (at the effective rate). 4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2018 (at the effective rate).

Fores Construction Company reported a pretax operating loss of $220 million for financial reporting purposes in 2018. Contributing to the loss were (a) a penalty of $15 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2018 and (b) an estimated loss of $20 million from accruing a loss contingency. The loss will be tax deductible when paid in 2019. The enacted tax rate is 40%. There were no temporary differences at the beginning of the year and none originating in 2018 other than those described above. Taxable income in Fores’s two previous years of operation was as follows: 2016 $ 115 million 2017 60 million Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2018. Fores elects the carryback option. 2. What is the net operating loss reported in 2018 income statement? 3. Prepare the journal entry to record income taxes in 2019 assuming pretax accounting income is $95 million. No additional temporary differences originate in 2019.

Financial Software Inc. (FSI) provides ERP software to large corporations.   Big Corporation signs a contract with FSI on January 1, 2018. FSI will provide the ERP, including installation and testing, consulting services to integrate the software with all of Big Corp’s other systems, and training services. Another firm could provide the consulting services and/or training services, but FSI requires that they perform the installation and testing. The training will be provided for 3 years. The total price of the contract is $2,300,000. FSI would charge $1,750,000 for the software (including installation and testing) and the estimated Fair value of the consulting services is $500,000. The total fair value of the training is $150,000 over three years. FSI completes the installation and testing during 2018. The consulting services are 50% complete in 2018 and fully completed in 2019. Approximately 50% of the training services are provided in 2018 and then 25% and 25% in 2019 and 2020, respectively.

Determine how to recognize revenue in 2018, 2019 and 2020. Please explain your recommendation.