Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 180 million of 6% bonds, dated January 1, on January 1, 2018. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 8%. The price paid for the bonds was $160 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2018, was $170 million. Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). 4-a. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet? 4-b. Prepare the entry necessary to achieve this reporting objective. 5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?

On January 1, 2018, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $360 million cash. At the date of acquisition of the stock, Lake's net assets had a fair value of $800 million. Their book value was $700 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference. Lake’s net income for the year ended December 31, 2018, was $280 million. During 2018, Lake declared and paid cash dividends of $25 million. The buildings have a remaining life of 10 years.

Required:
1. Complete the table below and prepare all appropriate journal entries related to the investment during 2018, assuming Cameron accounts for this investment by the equity method.
2. Determine the amounts to be reported by Cameron.

2. Marvin’s Magic Shop begins 2018 with Accounts Receivable Balance of $80,000.00 and Allowance for Uncollectible Accounts $4,000.00. During the year Sales were $500,000.00 all on account receivable. Cash Collections totaled $220,000.00. Two customers’ accounts totaling $3,000 was written off during the year. At 12/31/2018, Marvin determines that 8% of ending Accounts Receivable will not be paid due to the bad economy.

Answer the following questions:

Required: a. Record the all Journal Entries for the year for: i. Sales Transactions ii. Collections of Customer Accounts iii. Write-off Transactions

b. What is the Journal Entry to record Estimated Bad Debt Expense at Dec 31, 2018?

c. What is the ending balance in the Allowance for Uncollectible Accounts at Dec 31, 2018?

d. What is the Realizable value of Accounts Receivable at 12/31/18?

During 2017, Culver Company started a construction job with a contract price of $1,610,000. The job was completed in 2019. The following information is available.

2017
2018
2019
Costs incurred to date       $393,900       $760,380       $1,059,000
Estimated costs to complete       616,100       341,620       –0–
Billings to date       299,000       905,000       1,610,000
Collections to date       268,000       818,000       1,421,000

  
Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Gross profit recognized in 2017      
$
Gross profit recognized in 2018      
$
Gross profit recognized in 2019      
$

Prepare all necessary journal entries for 2018.

Titles and Explanation
Debit
Credit

(To record cost of of construction.)

(To record progress billings.)

(To record collections.)

(To recognize revenue.)

Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.

2017
2018
2019
Gross profit      
$
$
$

Fatima, Nouf, and Zainab have the following capital balances; $50,000, $72,000 and $95,000 respectively at the beginning of 2018. Because of a cash shortage Fatima invests an additional $15,000 on May 1st, 2018. Each partner withdraws $1,200 per month. Fatima, Nouf, and Zainab receive a salary of $12,000, $14,000 and $18,000 respectively, for work done during the year. Each partner receives interest of 8% on that partner’s beginning capital balance without regard to normal drawings. Any remaining profits are split 25%, 35%, and 40% respectively. The net income for 2018 is $40,000.

Required:

a. Allocate the $40,000 income among the partners. Show your working.

b. Determine the ending capital balances for each partner at December 31st, 2018. Show your workings.

c. Record the journal entry for the distribution of net income.

Deen Construction began a construction project in 2018. The contract price was $1,250,000, and the estimated costs were $1,000,000. Data for each year of the contract are as follows:

Instructions:

1. Assuming Deen the percentage of completion method:

(a) Prepare a schedule that computes the gross profit for 2018 - 2020

(b) Determine the net amount for construction in progress inventory should be reported on the 2018 balance sheet.

(c) Prepare all the necessary journal entries for 2019

2. Compute the amount of gross profit to be recognized each year, assuming the completed contract method is used.

You must show supporting computations to receive credit.

As of the fiscal 2018 year-end, a company unknowingly overstated its ending inventory.

Required—Indicate how, if at all, the company’s overstatement of its fiscal 2018 ending inventory affected each of the financial statement elements listed below as follows:

• If the element was overstated as a result of the error, enter “OVER” in the blank provided.

• If the element was understated as a result of the error, enter “UNDER” in the blank provided.

• If the element was neither overstated or understated as a result of the error, i.e., if the element

  was correctly stated despite the error, enter “NONE” in the blank provided.

Income Statements:

Balance Sheet:

Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $184,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $645,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $1,990,000 in total. Seida's January 1, 2018 book value equaled $1,840,000, although land was undervalued by $139,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $275,000 and declared and paid dividends of $109,000. Prepare the 2018 journal entries for Milani related to its investment in Seida. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

The Bradford Company issued 8% bonds, dated January 1, with a face amount of $75 million on January 1, 2018 to Saxton-Bose Corporation. The bonds mature on December 31, 2037 (20 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. (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. to 3. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1, 2018, interest revenue on June 30, 2018 and interest revenue on December 31, 2018 (at the effective rate). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

On 12th April 2018 Pit Bull Ltd enters into a contract with a New Zealand company, Secure Ltd, whereby Secure Ltd will build a printing machine for Pit Bull Ltd.

The machine has been priced at NZ$850000. The printing machine is completed on 14th June 2019 and shipped FOB Wellington on that date.

The debt remains unpaid at 30th June 2019, which is the end of Pit Bulls Ltd’s financial reporting period.

The exchange rates at the relevant dates are as follows:

12Th April 2018 A$1.00 = NZ$1.20

30th June 2018 A$1.00 = NZ$1.15

14th June 2019 A$1.00 = NZ$1.30

30th June 2019 A$1.00 = NZ$1.25 Required:

Complete the full journal entries for Pit Bull Ltd for the years ending 30th June 2018 and 30th June 2019 to reflect the above events.

(Marks: 20)