Potter Corporation buys 30% of Sunshine Supply Company on January 1, 2017, for

     $300,000.  The equity method of accounting is to be used.  Sunshine’s net assets on

     that date were $750,000.  Any excess of cost over book value is attributable to a

     customer list with a 10-year remaining life.  Sunshine immediately begins supplying

     inventory to Potter as follows:

Inventory held at the end of one year by Potter is sold at the beginning of the next.

Sunshine’s net income was $80,000 for 2017 and is $110,000 for 2018.  Sunshine

paid dividends of $30,000 each year.

Required:

Prepare all of Potter’s entries for 2017 and 2018 related to its investment in Sunshine.

You are auditing a retail apparel company as of December 2018. The inventory for black down jackets show 1,263 jackets. When you look at the invoices for the jackets from the wholesaler from which the company purchases those jackets, you see the following:

1.Assuming the company uses LIFO as the inventory valuation method, determine the cost of inventory at December 31, 2018.

2.The company can buy the same jacket from the wholesaler at $270 in December 2018. Determine the total carrying value of inventory as of December 31, 2018.

3.Then replace the price of $270 with $277 or $ 282 in the question 2 above and see how your answer changes.

2. The Delta company uses a periodic inventory system. The beginning balance of inventory and purchases made by the company during the month of July, 2018 are given below: (1.5 pt)

• July 01: Beginning inventory, 500 units @ $20 per unit.
• July 18: Inventory purchased, 800 units @ $24 per unit.
• July 25: Inventory purchased, 700 units @ $26 per unit.
• July 29: Inventory purchased, 400 units @$25 per unit.

Ending Inventory on July 30, 2018 were 500 units.

1. Calculate the number of units sold during July 2018
2. Compute the Cost of goods sold in July using the following inventory costing methods:
   1. First in, first out (FIFO) method
   2. Last in, first out (LIFO) method
   3. Average Cost method.
3. Compute the cost of the Ending Inventory of July, 2018 using the Average Cost method

On January 1, 2017, Alison, Inc., paid $90,400 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $248,500 and liabilities of $93,500. A patent held by Holister having a $12,300 book value was actually worth $55,800. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2017, Holister earned income of $52,500 and declared and paid dividends of $18,000. In 2018, it had income of $56,000 and dividends of $23,000. During 2018, the fair value of Allison’s investment in Holister had risen from $102,300 to $107,100.

a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2018?

b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2018?

ACY Limited (“ACY”) purchased a specialized machine for its business use for a total price of $3,000,000, paid in cash, on 1 January 2018. The total price included installation fee of $50,000, which enabled the machine to be immediately available for ACY’s use on 1 January 2018. This is estimated that the machine has a useful life of 10 years with a residual value up to $200,000. Double-declining-balance depreciation method is adopted. On 1 January 2018, to help finance the acquisition of this machine, ACY issued a 5-year zero-interest-bearing note, with a face value of $1,000,000, due on 31 December 2022. The market rate is 8% for notes with similar risks.

Question

For the year ended 31 October 2018, how much interest expense shall be reported in the Statement of Profit or Loss of ACY?

Select one:

A. $66,667

B. $54,447

C. $Nil. All interest shall be capitalized as cost of the machine acquired.

D. $45,372

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

UK Ltd for the year ended 31 December 2018.

The financial statements were authorized in late March 2019.

The diluted earnings per share for the year ended 31 December 2018 is 4.3 cents.

Required:

1. Assuming that the company made a one for two bonus issue on 3 January 2019. Calculate the diluted earnings per share for the year ended 31 December 2018.

2. In addition to all the above information, assuming $60m instead of $30m dividend is
   paid to the convertible preference shares (cumulative) due to the dividend for year 2017 is not paid. Calculate the diluted earnings per share for the year ended 31 December 2018. Briefly explain the effect of the $60m dividend on the earnings effect.

Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $160 million of 8% bonds, dated January 1, on January 1, 2018. Management intends to include the investment in a short-term, active trading portfolio. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $142 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 $150 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 any entry necessary to achieve this reporting objective.
5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?

E2-10 (Algo) Preparing Cost of Goods Manufactured and Income Statement [LO 2-6]

Manufacturing costs for Davenport Company during 2018 were as follows:

Note: The pre-determined overhead rate is 0.95 (95%) of direct labor cost.

Required:

1. Prepare a Cost of Goods Manufactured report.

2. Prepare a Partial Income Statement if sales revenue was $1,450,000 and operating expenses were $310,000 for 2018.

Question 1 Parts A and B

A. Hepburn Company bought a copyright for $72,600 on January 1, 2015, at which time the copyright had an estimated useful life of 11 years. On January 5, 2018, the company determined that the copyright would expire at the end of 2021. How much should Hepburn record as amortization expense for this copyright for 2018? (Do not round your intermediate calculation and round your answer to the nearest dollar amount.)

Multiple Choice

• $1,320.

• $13,200.

• $440.

• $6,600.

B. Popeye Company purchased a machine for $320,000 on January 1, 2017. Popeye depreciates machines of this type by the straight-line method over a five-year period using no salvage value. Due to an error, no depreciation was taken on this machine in 2017. Popeye discovered the error in 2018. What amount should Popeye record as depreciation expense for 2018? The tax rate is 40%.

Multiple Choice

• $38,400.

• $64,000.

• $76,800.

• $128,000.