Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 140 million of 10% 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 12%. The price paid for the bonds was $124 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 $130 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?

(NOL Carryforward, Valuation Account Needed)

Topper Company reported the following pretax financial income (loss) for the years 2018 through 2022:

2018 $ 70,000

2019 45,000

2020 (260,000)

2021 90,000

2022 215,000

Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 30% for 2018 through 2020, and 20% for 2021 and thereafter.

Instructions

(a) Prepare the journal entries for the years 2018 through 2022 to record income tax expense, income tax payable (refund- able), and the tax effects of the loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that 60 percent of the benefits of the loss carryforward will not be realized.

(b) Prepare the income tax section of the 2020 income statement beginning with the line “Income (loss) before income taxes.”

Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 80 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 $64 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 $70 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?

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, 2022 (5 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.)

Forecasting

A) Dexter Company reported the following 2018 income statement

Forecast Dexter’s income statement assuming a 5% increase in sales, a 17% effective tax rate, and a continuation of the 2018 percentage relation to net sales for expenses except for interest where the company projects no change.

B) Snap-On Corp 2018 financial statements include the following:

Forecast accounts receivable, inventory, and accounts payable for 2019 given that sales are expected to grow by 8% in 2019.

The DeVille Company reported pretax accounting income on its income statement as follows: 2018 $ 355,000 2019 275,000 2020 345,000 2021 385,000 Included in the income of 2018 was an installment sale of property in the amount of $30,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $12,000 in 2019, $15,000 in 2020, and $3,000 in 2021. Included in the 2020 income was $10,000 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.)

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 $34,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $13,600 in 2019, $17,000 in 2020, and $3,400 in 2021.

Included in the 2020 income was $12,000 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, 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.