On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 120,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 120,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:

Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.

1. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.
2. What is the impact on net income in 2017?
3. What is the impact on net income in 2018?

Bill Darby started Darby Company on January 1, 2018. The company experienced the following events during its first year of operation:

1.Earned $16,200 of cash revenue.

2.Borrowed $12,000 cash from the bank.

3.Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, issued on September 1, 2018, had a one-year term and an 8 percent annual interest rate.

Required

A.What is the amount of interest expense to record for 2018?

B.What amount of cash was paid for interest in 2018?

C.Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event increases (I), decreases (D), or does not affect (NA) each element of the financial statements. In the Cash Flows column, designate the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). The first transaction has been recorded as an example.

23) Marshals, Inc. has the following comparative balance sheets for 2018 and 2017:

                                         2018                        2017             Change  

Cash                           $   96,000                 $ 108,000     12,000

Receivables                    47,000                     49,000           2,000

Inventory                      110,000                   100,000         10,000

Office Supplies                 8,000                     12,000           4,000

Plant assets, net           380,000                 300,000         80,000

Long term Investment  126,000                    84,000         42,000

                                   $ 767,000               $ 653,000                          

Accounts payable       $102,000                $   98,000          4,000

Accrued liabilities            40,000                     14,000        26,000

Long-term note payable 80,000                 150,000        70,000

Common stock              420,000                  330,000        90,000

Retained earnings          125,000                   61,000         64,000

                                     $ 767,000             $ 653,000  

There was a purchase of Land for a new site for the period. That was the only increase in Plant assets.

The income statement for 2018 is as follows:

                   Sales                         $ 1,800,000

                   Cost of sales                   900,000

                   Gross profit                     900,000

                   Depreciation expense      90,000

                   Other expenses              620,000

                   Net income                  $ 190,000

Prepare a statement of cash flows for Marshals, Inc. for the year ended December 31, 2018.

On December 21, 2017, Nash Company provided you with the following information regarding its equity investments. December 31, 2017 Investments (Trading) Cost Fair Value Unrealized Gain (Loss) Clemson Corp. stock $19,900 $19,000 $(900 ) Colorado Co. stock 10,100 9,100 (1,000 ) Buffaloes Co. stock 19,900 20,460 560 Total of portfolio $49,900 $48,560 (1,340 ) Previous fair value adjustment balance 0 Fair value adjustment—Cr. $(1,340 ) During 2018, Colorado Company stock was sold for $9,590. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,360. None of the equity investments result in significant influence. (a) Prepare the adjusting journal entry needed on December 31, 2017. (b) Prepare the journal entry to record the sale of the Colorado Co. stock during 2018. (c) Prepare the adjusting journal entry needed on December 31, 2018.

On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 230,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 230,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:

Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.

1.Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.

2.What is the impact on net income in 2017?

3.What is the impact on net income in 2018?

During 2017, Ivanhoe Company started a construction job with a contract price of $1,590,000. The job was completed in 2019. The following information is available.

a) Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Gross profit in 2017

Gross profit in 2018

Gross profit in 2019

b) Prepare all necessary journal entries for 2018.

Dr. Construction in Process

Cr. Materials, Cash, Payables

--

Dr. Accounts Receivable

Cr. Billings on Construction in Process

--

Dr. Cash

Cr. Accounts Receivable

--

Dr. Construction in Process

Dr. Construction Expense

Cr. Revenue from Long Term Contracts

c) Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.

2017

2018

2019

Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2018, capital balances were as follows:

Due to a cash shortage, Purkerson invests an additional $6,000 in the business on April 1, 2018.

Each partner is allowed to withdraw $700 cash each month.

The partners have used the same method of allocating profits and losses since the business's inception:

• Each partner is given the following compensation allowance for work done in the business: Purkerson, $14,000; Smith, $24,000; and Traynor, $4,000.
• Each partner is credited with interest equal to 20 percent of the average monthly capital balance for the year without regard for normal drawings.
• Any remaining profit or loss is allocated 3:2:5 to Purkerson, Smith, and Traynor, respectively. The net income for 2018 is $24,000. Each partner withdraws the allotted amount each month.

What are the ending capital balances for Purkerson, Smith, and Traynor for 2018?

On January 1, 2018, NFB Visual Aids issued $900,000 of its 20-year, 10% bonds. The bonds were priced to yield 12%. Interest is payable semiannually on June 30 and December 31. NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $768,000 as determined by their market value in the over-the-counter market. General (risk-free) interest rates did not change during 2021. (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-a. Determine the price of the bonds at January 1, 2018.
1-b to 4. Prepare the necessary Journal entries.
Record the issuance of bonds. Record the first interest payment. Record the second interest payment.The entry to adjust the bonds to their fair value for presentation in the December 31, 2018 balance sheet.

Exercise 17-7

On December 21, 2017, Riverbed Company provided you with the following information regarding its equity investments.

During 2018, Colorado Company stock was sold for $8,550. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—$18,010; Buffaloes Co. stock—$19,430. None of the equity investments result in significant influence.

financial accounting by Spiceland, J. David; Thomas, Wayne; Hermann, Don

Turn to page# 117 -> Read the Ethical Dilemma section on Prepaid Advertising (100% Points). Part I: a) Write the journal entries to record the advertising expense for the month of November 2018 and December 2018 (Assume $500,000 per each month). b) Write the journal entry to record the advertising cost as a Prepaid Ads (an asset) for the fiscal year 2018. c) If the Prepaid Ads journal is recorded and posted in 2018 (from item b) , what is the reversal journal for this transaction in fiscal year 2019? Part II: Answer the two(2) questions asked from the Ethical Dilemma problem : (1) As an employee, should you knowingly record advertising cost incorrectly if asked to do so by your superior?” (2) Does your answer change if you believe that misreporting will save employee jobs? The answer to Q1& Q2 (Part II) should be a min 1 paragraph / max up to 2 paragraphs.