On January 1, 2017, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $600,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $400,000 and Rockne's assets and liabilities had a collective net fair value of $1,000,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $390,000 in 2018. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $450,000 in 2017 and $550,000 in 2018. Approximately 35 percent of the inventory purchased during any one year is not used until the following year.

1. What is the noncontrolling interest's share of Rockne's 2018 income?
2. Prepare Doone's 2018 consolidation entries required by the intra-entity inventory transfers.

The Bradford Company issued 6% bonds, dated January 1, with a face amount of $50 million on January 1, 2018 to Saxton-Bose Corporation. The bonds mature on December 31, 2022 (5 years). For bonds of similar risk and maturity, the market yield is 8%. 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.)

Below are three independent and unrelated errors.

On December 31, 2017, Wolfe-Bache Corporation failed to accrue office supplies expense of $1,750. In January 2018, when it received the bill from its supplier, Wolfe-Bache made the following entry:

On the last day of 2017, Midwest Importers received a $89,000 prepayment from a tenant for 2018 rent of a building. Midwest recorded the receipt as rent revenue.

At the end of 2017, Dinkins-Lowery Corporation failed to accrue interest of $7,900 on a note receivable. At the beginning of 2018, when the company received the cash, it was recorded as interest revenue.

   
Required:
For each error:
1. What would be the effect of each error on the income statement and the balance sheet in the 2017 financial statements?
2. Prepare any journal entries each company should record in 2018 to correct the errors.
  

The Bradford Company issued 8% bonds, dated January 1, with a face amount of $70 million on January 1, 2018 to Saxton-Bose Corporation. The bonds mature on December 31, 2032 (15 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.)

Below are three independent and unrelated errors.

On December 31, 2017, Wolfe-Bache Corporation failed to accrue office supplies expense of $1,300. In January 2018, when it received the bill from its supplier, Wolfe-Bache made the following entry:

Office supplies expense 1,300

Cash 1,300

On the last day of 2017, Midwest Importers received a $80,000 prepayment from a tenant for 2018 rent of a building. Midwest recorded the receipt as rent revenue.

At the end of 2017, Dinkins-Lowery Corporation failed to accrue interest of $7,000 on a note receivable. At the beginning of 2018, when the company received the cash, it was recorded as interest revenue.

Required:

For each error:

1. What would be the effect of each error on the income statement and the balance sheet in the 2017 financial statements?

2. Prepare any journal entries each company should record in 2018 to correct the errors.

The DeVille Company reported pretax accounting income on its income statement as follows:
   

   
Included in the income of 2018 was an installment sale of property in the amount of $54,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $21,600 in 2019, $27,000 in 2020, and $5,400 in 2021.

Included in the 2020 income was $22,000 interest from investments in municipal bonds.

The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new tax legislation was passed reducing the tax rate to 25% for the years 2020 and beyond.

Required:
Prepare the year-end journal entries to record income taxes for the years 2018–2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

On January 1, 2018, Cameron Inc. bought 30% of the outstanding common stock of Lake Construction Company for $420 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 $250 million. During 2018, Lake declared and paid cash dividends of $30 million. The buildings have a remaining life of 5 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.

The Bradford Company issued 8% bonds, dated January 1, with a face amount of $70 million on January 1, 2018 to Saxton-Bose Corporation. The bonds mature on December 31, 2032 (15 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.)

Question:

The Bradford Company issued 10% bonds, dated January 1, with a face amount of $90 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 12%. 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.)

National Orthopedics Co. issued 8% bonds, dated January 1, with a face amount of $600,000 on January 1, 2018. The bonds mature on December 31, 2021 (4 years). For bonds of similar risk and maturity the market yield was 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. Determine the price of the bonds at January 1, 2018.
2. Prepare the journal entry to record their issuance by National on January 1, 2018.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2018.
5. Prepare the appropriate journal entries at maturity on December 31, 2021.