On December 31, 2017, Berclair Inc. had 500 million shares of common stock and 6 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2018, was $800 million. The income tax rate is 40%. Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2013. The options are exercisable as of September 13, 2017, for 30 million common shares at an exercise price of $56 per share. During 2018, the market price of the common shares averaged $70 per share. In 2014, $62.5 million of 8% bonds, convertible into 6 million common shares, were issued at face value. Required: Compute Berclair’s basic and diluted earnings per share for the year ended December 31, 2018.

Tanner-UNF Corporation acquired as a long-term investment $270 million of 8% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $230 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management has classified the bonds as available-for-sale investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $240 million.

Required:
1. & 2. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate.
3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet.
4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $220 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale.

Brady Construction Company contracted to build an apartment complex for a price of $5,200,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars.

On December 31, 2017, Berclair Inc. had 280 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2018, was $250 million. The income tax rate is 40%.

Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2013. The options are exercisable as of September 13, 2017, for 30 million common shares at an exercise price of $56 per share. During 2018, the market price of the common shares averaged $70 per share.

In 2014, $62.5 million of 8% bonds, convertible into 6 million common shares, were issued at face value.

Required:

Compute Berclair’s basic and diluted earnings per share for the year ended December 31, 2018

Brady Construction Company contracted to build an apartment complex for a price of $6,000,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars.

Required:
Complete the following table. (Do not round intermediate calculations. Enter answers in dollars. Round your final answers to the nearest whole dollar. Negative amounts should be indicated by a minus sign.)

Complete the following table.

                                Gross Profit (Loss) Recognized

                   Revenue Recognized Over Time             Revenue Recognized Upon Completion

Situation       2016       2017       2018                             2016       2017     2018       

1.

2.

3.

4.

5.

6.

On December 6, 2017, Norwood Co., an office equipment supplier, sold a copier for cash of $12,000 (cost $9,400) with a two-year parts and labour warranty. Based on prior experience, Norwood expects eventually to incur warranty costs equal to 5% of the selling price. The fiscal year coincides with the calendar year. On January 20, 2018, the customer returned the copier for repairs that were completed the same day. The cost of the repairs consisted of $198 for the materials taken from the parts inventory and $360 of labour that was fully paid with cash. These were the only repairs required in 2018 for this copier.

Required:
1. How much warranty expense should the company report in 2017 for this copier?

2. How much is the warranty liability for this copier as of December 31, 2017?

3. How much warranty expense should the company report in 2018 for this copier?

4. How much is the warranty liability for this copier as of December 31, 2018?

5. Show the journal entries that would be made to record (a) the sale (assume a perpetual inventory system); (b) the adjustment on December 31, 2017, to record the warranty expense; and (c) the repairs that occurred in January 2018. Ignore sales taxes.

Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $187,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $626,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $1,980,000 in total. Seida's January 1, 2018 book value equaled $1,830,000, although land was undervalued by $130,000. 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 $282,000 and declared and paid dividends of $101,000. 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.)

1.

Record acquisition of Seida stock.

2

Record income for the year: 40% of the $282,000 reported income.

3

Record 2018 amortization for trademark excess fair value.

4

Record dividend declaration from Seida.

5

The record collection of dividend from investee.

ABC Corp. Balance Sheet As of December 31, 2018

1. On January 1^st, 2019, ABC Corp bought an equipment for $2,000. The equipment has a useful life of 5 years and has a salvage value of $500.
2. On May 1^st, 2018, ABC Corp received $1,200 cash for services to be performed in the future. The service agreement is for a period of two years and the service will be performed evenly throughout the two-year period starting from May 1^st, 2018.
3. On July 1^st, 2018, ABC Corp paid $600 for a one-year insurance policy. The policy starts on July 1^st, 2018 and ends on June 30^th, 2019

a) Make journal entries for the following transactions.
b) Prepare the unadjusted trial balance.
c) Make the appropriate adjusting entries at year-end.
d) Prepare the adjusted trial balance
e) Make the appropriate closing entries. Hint: close it directly to retained earnings.

Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2018 through 2021 except for differences in depreciation on an operational asset. The asset cost $280,000 and is depreciated for income tax purposes in the following amounts:

2018 $ 92,400

2019 123,200

2020 42,000

2021 22,400

The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes. Income amounts before depreciation expense and income taxes for each of the four years were as follows. 2018 2019 2020 2021 Accounting income before taxes and depreciation $ 150,000 $ 170,000 $ 160,000 $ 160,000 Assume the average and marginal income tax rate for 2018 and 2019 was 30%; however, during 2019 tax legislation was passed to raise the tax rate to 40% beginning in 2020. The 40% rate remained in effect through the years 2020 and 2021. Both the accounting and income tax periods end December 31. Required: Prepare the journal entries to record income taxes for the years 2018 through 2021.

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $330,000 in cash. The equipment had originally cost $297,000 but had a book value of only $181,500 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $430,000 in net income in 2018 (not including any investment income) while Brannigan reported $140,900. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which was amortized at a rate of $5,300 per year.

a) What is consolidated net income for 2018?

b) What is the parent's share of consolidated net income for 2018 if Ackerman owns only 90 percent of Brannigan?

c) What is the parent's share of consolidated net income for 2018 if Ackerman owns only 90 percent of Brannigan and the equipment transfer was upstream?

d) What is the consolidated net income for 2019 if Ackerman reports $450,000 (does not include investment income) and Brannigan $152,200 in income? Assume that Brannigan is a wholly owned subsidiary and the equipment transfer was downstream.