The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys equity securities as investments. None of Ornamental’s investments are large enough to exert significant influence on the investee. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Mar. 31 Acquired Distribution Transformers Corporation common stock for $520,000.

Sep. 1 Acquired $1,080,000 of American Instruments' common stock.

Sep. 30 Received a $18,200 dividend on the Distribution Transformers common stock.

Oct. 2 Sold the Distribution Transformers common stock for $557,000.

Nov. 1 Purchased $1,560,000 of M&D Corporation common stock.

Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments common stock $ 1,018,000 M&D Corporation common stock $ 1,640,000

Required: 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end.

2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.

You are the auditor of a publicly listed company. In the kickoff meeting for the audit 2018, the chairman of the board of director, who is also a controlling shareholder presented to you the following financial information:

The worldwide economy is currently static, and consumer confidence has a little bit falling in the first quarter 2019. The company has an internal audit function. In previous years, your assessment of the system of internal control was that it was effective. Your experience with the company in past years has shown that its forecasts are generally reliable.

Required:

a) What qualitative factors referred to in the information given above about Amusement will you consider in determining preliminary materiality for the 2018 audit? How will these factors affect your assessment of materiality?

You are required to present your answer with (1) Qualitative factors, (2) Effect on materiality

b) What quantitative factors referred to in the above information about Amusement will you consider in determining preliminary materiality for the 2018 audit? Why?

1. Problem 6-34 (Algorithmic) (LO. 5, 6, 8)

   Five years ago, Gerald invested $186,000 in a passive activity, his sole investment venture. On January 1, 2017, his amount at risk in the activity was $37,200. His shares of the income and losses were as follows:

   Year Income (Loss) 2017 ($55,800) 2018 (37,200) 2019 57,200

   Gerald holds no suspended at-risk or passive activity losses at the beginning of 2017.

   If an answer is zero, enter "0".

   a. If losses were limited only by the at-risk rules, how much can Gerald deduct in 2017 and 2018?

   Year Loss Allowed Suspended 2017 ($55,800) $ $ 2018 ($37,200) Total $

   b. Refer to the information in part (a) above. Assuming Gerald has $57,200 income in 2019, what is his taxable income from the activity in 2019 under at-risk rules?
   $

   c. If losses were limited by the at-risk and passive activity loss rules, how much would Gerald be able to deduct in 2017 and 2018?

   2017: $

   2018: $

   d. Assuming Gerald has $57,200 income in 2019, (and considering both at-risk and passive activity loss rules), what is the amount of Gerald's suspended passive activity losses at the end of 2019? $

   At the end of 2019, what is the amount of Gerald's adjusted basis in the activity?
   $

Cordova, Inc., reported the following receivables in its December 31, 2017, year-end balance sheet:

Additional information:

The notes receivable account consists of two notes, a $120,000 note and a $290,000 note. The $120,000 note is dated October 31, 2017, with principal and interest payable on October 31, 2018. The $290,000 note is dated March 31, 2017, with principal and 10% interest payable on March 31, 2018. Interest rate on $120,000 note is 6%

During 2018, sales revenue totaled $2,110,000, $1,970,000 cash was collected from customers, and $40,000 in accounts receivable were written off. All sales are made on a credit basis. Bad debt expense is recorded at year-end by adjusting the allowance account to an amount equal to 10% of year-end gross accounts receivable.

Required:
1. In addition to sales revenue, what revenue and expense amounts related to receivables will appear in Cordova’s 2018 income statement?
2. Calculate the receivables turnover ratio for 2018. (Round your answer to 2 decimal places.)

Interest Revenue

Bad Debt Expense

AR Turnover Rate?

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.

Also, What is construction expenses to date for 2019?

On January 1, 2018, entered into a three-year lease for new office space agreeing to lease payments of: $5,500 in 2018, $7,000 in 2019 and $8,500 in 2020. Payments are due on December 31 of each year with the first payment being made on December 31, 2018. Harlon is aware that the lessor used a 6% interest rate when calculating lease payments. (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:
1-4. Prepare the appropriate entries for Harlon Consulting on January 1, 2018, December 31, 2018, 2019 and 2020 to record the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.)

• 1. Record for Harlon consulting the beginning of the lease.

• 2. Record the lease payment and interest expense for Harlon Consulting.

• 3. Record the amortization expense for Harlon Consulting.

• 4. Record the lease payment and interest expense for Harlon Consulting.

• 5. Record the amortization expense for Harlon Consulting.

• 6. Record the lease payment and interest expense for Harlon Consulting.

• 7. Record the amortization expense for Harlon Consulting.

b. Complete a statement of cash flows for the period.

c. Compute the changes in the balance sheets from 2017 to 2018.  

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys equity securities as investments. None of Ornamental’s investments are large enough to exert significant influence on the investee. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Required:

1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end.

2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.

Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2018, for $450 million.

At the date of purchase, the book value of Vancouver's net assets was $800 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $10 million for the inventory and by $15 million for the plant facilities.

The estimated useful life of the plant facilities is 12 years. All inventory acquired was sold during 2018.

Vancouver reported net income of $190 million for the year ended December 31, 2018. Vancouver paid a cash dividend of $60 million.

Required:
1. Prepare all appropriate journal entries related to the investment during 2018.
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2018?
3. What amount should Northwest report in its balance sheet as its investment in Vancouver?
4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver?

Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2018, for $420 million.

At the date of purchase, the book value of Vancouver's net assets was $785 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $30 million for the plant facilities.

The estimated useful life of the plant facilities is 15 years. All inventory acquired was sold during 2018.

Vancouver reported net income of $160 million for the year ended December 31, 2018. Vancouver paid a cash dividend of $30 million.

Required:
1. Prepare all appropriate journal entries related to the investment during 2018.
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2018?
3. What amount should Northwest report in its balance sheet as its investment in Vancouver?
4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver?