On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,150,000. During 2018, costs of $2,050,000 were incurred with estimated costs of $4,050,000 yet to be incurred. Billings of $2,550,000 were sent, and cash collected was $2,300,000.

In 2019, costs incurred were $2,550,000 with remaining costs estimated to be $3,675,000. 2019 billings were $2,800,000 and $2,525,000 cash was collected. The project was completed in 2020 after additional costs of $3,850,000 were incurred. The company’s fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.

Required:
1. Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 using the percentage of completion method?
2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

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 $200,000 and is depreciated for income tax purposes in the following amounts: 2018 $ 66,000 2019 88,000 2020 30,000 2021 16,000 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 $ 110,000 $ 130,000 $ 120,000 $ 120,000 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

At the end of its first year of operations on December 31, 2018, the Hondo Company reported the following information for the year: (Assume any deferred tax assets are more likely than not to be realized).

*Remainder reportable in 2019

Required:

a. Determine taxable income

b. Prepare the income tax journal entr(ies) for the company at the end of 2018 including both current and deferred taxes

c. What was total income tax expense for 2018 and show how it would be presented in the income statement starting with income before taxes for financial reporting purposes.

Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2017, for $544,200 in cash. Lowly's book value at that date was reported as $775,000 and the fair value of the noncontrolling interest was assessed at $362,800. Any excess acquisition-date fair value over Lowly's book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2018, Lowly acquired a 20 percent interest in Mighty. The price of $346,000 was equivalent to 20 percent of Mighty's book and fair value.

Neither company has paid dividends since these acquisitions occurred. On January 1, 2018, Lowly's book value was $1,017,000, a figure that rises to $1,061,500 (common stock of $300,000 and retained earnings of $761,500) by year-end. Mighty's book value was $1.73 million at the beginning of 2018 and $1.83 million (common stock of $1 million and retained earnings of $830,000) at December 31, 2018. No intra-entity transactions have occurred and no additional stock has been sold. Each company applies the initial value method in accounting for the individual investments.

1. Prepare worksheet entries which are required to consolidate these two companies for 2018?

2. What is the net income attributable to the noncontrolling interest for this year?

Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries are prepared.

On December 30, 2014, Rival Industries acquired its office building at a cost of $10,200,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2018, the estimate of useful life was revised to 28 years in total with no change in residual value.

At the beginning of 2014, the Hoffman Group purchased office equipment at a cost of $385,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-of-the-years’-digits method. On January 1, 2018, the company changed to the straight-line method.

At the beginning of 2018, Jantzen Specialties, which uses the sum-of-the-years’-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net income by $465,000.

Required:

1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change as well as any adjusting entry for 2018 related to the situation described. (Ignore income tax effects.)

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,540,000. During 2018, costs of $2,180,000 were incurred with estimated costs of $4,180,000 yet to be incurred. Billings of $2,680,000 were sent, and cash collected was $2,430,000.

In 2019, costs incurred were $2,680,000 with remaining costs estimated to be $3,870,000. 2019 billings were $2,930,000 and $2,655,000 cash was collected. The project was completed in 2020 after additional costs of $3,980,000 were incurred. The company’s fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.

Required:
1. Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 using the percentage of completion method?
2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

Cardinal Industries had the following operating results for 2018: Sales = $34,015; Cost of goods sold = $24,065; Depreciation expense = $5,967; Interest expense = $2,695; Dividends paid = $1,969. At the beginning of the year, net fixed assets were $19,910, current assets were $7,033, and current liabilities were $3,974. At the end of the year, net fixed assets were $24,475, current assets were $8,666, and current liabilities were $4,646. The tax rate for 2018 was 24 percent. a. What is net income for 2018? (Do not round intermediate calculations.) b. What is the operating cash flow for 2018? (Do not round intermediate calculations.) c. What is the cash flow from assets for 2018? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) d-1. If no new debt was issued during the year, what is the cash flow to creditors? (Do not round intermediate calculations.) d-2. If no new debt was issued during the year, what is the cash flow to stockholders? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) PLEASE GIVE CORRECT ANSWER HAVE GOTTEN THE WRONG ANSWER BEFORE

Morgan Company acquires 40% of the voting stock of Kirk Corporation on January 1, 2014, for $60,000,000, and treats it as an equity method investment. At the date of Morgan’s investment, the fair values of Kirk’s net assets differed from book values as follows:

                                                                                             Book value                                     Fair value                                                                                                     

Merchandise (sold during 2014)                                   $ 5,000,000                                     $ 8,000,000

Buildings and equipment (20-year life)                        30,000,000                                       40,000,000

Intangible assets (4-year life)                                           0                                                         10,000,000

Kirk reports total net income of $20,000,000 for the period 2014 - 2017, and $5,000,000 for 2018. Kirk paid no dividends during the period 2014 – 2017, but paid $1,000,000 in dividends in 2018. The accounting year for both companies ends December 31.

Kirk sells merchandise to Morgan at a markup of 30% on cost (Hint: what is the relationship between markup on cost and gross profit %?). The inventory balances held by Morgan, purchased from Kirk, are as follows.

Inventory held by Morgan, purchased from Kirk

December 31, 2017                         $1,560,000              

December 31, 2018                           2,600,000

Required:

a. Calculate equity in net income of Kirk, reported on Morgan’s 2018 income statement. (2p.)

b. Calculate Investment in Kirk, reported on Morgan’s December 31, 2018 balance sheet. (4p.)

A Company produces colorful 100% cotton shirts and the entity needs 50,000 kilos of raw materials in the production process. On December 1, 2018, the entity purchased a call option as a cash flow hedge to buy 50,000 kilos on July 1, 2019. The option strike price is P100 per kilo. The entity paid P50,000 for the call option. This derivative option contract means that if the market price is higher than P100, the entity can exercise the option and buy the asset at the strike option price of P100. If the market price is lower than P100, the entity can throw away the option and buy the asset at the cheaper price. The market price per kilo is P110 on December 31, 2018 and P115 on July 1, 21019.

1. What is the derivative asset on December 31, 2018?
2 what is the cash settlement from the speculator on July 1, 2015.
3 Assume the market price is P110 on December 31, 2018 and P90 on July 1, 2019. What amount should be recognized as loss on call option in 2019?
4. Assume the market price is P110 on December 31, 2018 and P90 on July 1, 2019. What is the derivative liability on July 1, 2019?