On January 1, 2017, Stream Company acquired 27 percent of the outstanding voting shares of Q-Video, Inc., for $716,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $1.6 million and $800,000, respectively. A customer list compiled by Q-Video had an appraised value of $306,000, although it was not recorded on its books. The expected remaining life of the customer list was 5 years with a straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill.

Q-Video generated net income of $304,000 in 2017 and a net loss of $112,000 in 2018. In each of these two years, Q-Video declared and paid a cash dividend of $18,000 to its stockholders.

During 2017, Q-Video sold inventory that had an original cost of $104,000 to Stream for $160,000. Of this balance, $80,000 was resold to outsiders during 2017, and the remainder was sold during 2018. In 2018, Q-Video sold inventory to Stream for $170,000. This inventory had cost only $136,000. Stream resold $100,000 of the inventory during 2018 and the rest during 2019.

For 2017 and then for 2018, compute the amount that Stream should report as income from its investment in Q-Video in its external financial statements under the equity method. (Enter your answers in whole dollars and not in millions. Do not round intermediate calculations.)

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $550,000 at face value.

Sep. 1 Acquired $1,350,000 of American Instruments' 10% bonds at face value.

Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds.

Oct. 2 Sold the Distribution Transformers bonds for $595,000.

Nov. 1 Purchased $2,150,000 of M&D Corporation 6% bonds at face value.

Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments bonds $ 1,305,000 M&D Corporation bonds $ 2,225,000 (Hint: Interest must be accrued.)

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.

Eximco Corporation (based in Champaign, Illinois) has a number of transactions with companies in the country of Mongagua, where the currency is the mong. On November 30, 2017, Eximco sold equipment at a price of 500,000 mongs to a Mongaguan customer that will make payment on January 31, 2018. In addition, on November 30, 2017, Eximco purchased raw materials from a Mongaguan supplier at a price of 300,000 mongs; it will make payment on January 31, 2018. To hedge its net exposure in mongs, Eximco entered into a two-month forward contract on November 30, 2017, to deliver 200,000 mongs to the foreign currency broker in exchange for $104,000. Eximco properly designates its forward contract as a fair value hedge of a foreign currency receivable. The following rates for the mong apply: Date Spot Rate Forward Rate (to January 31, 2018) November 30, 2017 $ 0.53 $ 0.52 December 31, 2017 0.50 0.48 January 31, 2018 0.49 N/A Eximco's incremental borrowing rate is 12 percent. The present value factor for one month at an annual interest rate of 12 percent (1 percent per month) is 0.9901. Prepare all journal entries, including December 31 adjusting entries, to record these transactions and the forward contract. What is the impact on net income in 2017? What is the impact on net income in 2018?

The following shows the unadjusted Trial Balance of Satyam Logistics Sdn Bhd during August 2018:

Additional information:

Depreciation was recorded on the Furniture using the straight-line method. Assume a useful life of five years with no salvage value.

Rent paid in advance for the month has expired. RM36,000 rent was paid in advance for four months period starting January 1.

Accrued Salaries Expenses, RM10,000.

Accrued Service Revenue, RM5,000.

Office Supplies on hand, RM6,000.

Required:

Prepare an Adjusted Trial Balance for Satyam Logistics Sdn Bhd’s as at August 31, 2018.

Prepare Satyam Logistics Sdn Bhd’s Statement of Comprehensive Income (Income Statement) and Statement of Owner’s Equity for the month ended August 31, 2018.                                                              

Prepare Satyam Logistics Sdn Bhd’s Statement of Financial Position (Balance Sheet) on August 31, 2018.                                       

On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $403,067 over a 5-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic's incremental borrowing rate is 8.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.9 million. (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. Determine the price at which Builders is “selling” the equipment (present value of the lease payments) at June 30, 2018.
2. What amounts related to the lease would Builders report in its balance sheet at December 31, 2018 (ignore taxes)?
3. What amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018 (ignore taxes)?

(For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar.)

On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $509,761 over a 5-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic's incremental borrowing rate is 8.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.8 million. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Determine the price at which Builders is “selling” the equipment (present value of the lease payments) at June 30, 2018.
2. What amounts related to the lease would Builders report in its balance sheet at December 31, 2018 (ignore taxes)?
3. What amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018 (ignore taxes)?

(For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar.)

Lease payments right of us Asset/Lease Payable

Situation 1

Situation 2

Situation 3

Gymson is an Italian subsidiary of U.S. company Universal Playgrounds, Inc.

Gymson began operations on January 1,2018. Its comparative balance sheets for January 1 and December 31, 2018, are presented below in euros:

                                                                                       1/1/18       12/31/18

Cash and receivables                                             € 10,000       € 20,000

Inventories, at cost 40,000          90,000

Noncurrent assets, net 700,000      530,000

Total assets €750,000      €640,000

Liabilities €550,000      €420,000

Capital stock 200,000      200,000

Retained earnings 0                 20,000

            Total liabilities and equity                       €750000       €640,000

During 2018, the following events occurred:

Sales revenue was €2,000,000, earned evenly during the year.

Inventory purchases were €1,200,000, made evenly over the year.

Out-of-pocket operating expenses were €650,000, incurred evenly throughout the year.

Depreciation expense on equipment was €170,000.

Dividends of €10,000 were declared and paid when the exchange rate was $1.52/€

REQUIRED: Calculate the translation gain/loss or the remeasurement gain/loss under each of the following assumptions. Be sure to clearly identify which it is and whether it is a gain or loss.

Assume Gymson’s functional currency is the euro.

Assume Gymson’s functional currency is the U.S. dollar.

Relevant exchange rates are as follows:

January 1, 2018                  $1.40

2018 average                      1.50

December 31, 2018          1.55

On January 1, 2018, LLB Industries borrowed $290,000 from trust Bank by issuing a two-year, 8% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2018, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 8% fixed interest rate on a notional amount of $290,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 8% at January 1, 6% at March 31, and 4% June 30, 2018. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as indicated below. The additional rise in the fair value of the note (higher than that of the swap) on June 30 was due to investors’ perceptions that the creditworthiness of LLB was improving. January 1 March 31 June 30 Fair value of interest rate swap 0 $ 8,000 $ 14,094 Fair value of note payable $ 290,000 $ 298,000 $ 304,094 Required: 1. Calculate the net cash settlement at June 30, 2018. 2. Prepare the journal entries on June 30, 2018, to record the interest and necessary adjustments for changes in fair value.

Brady Construction Company contracted to build an apartment complex for a price of $6,300,000. 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. Estimated Costs to Complete Costs Incurred During Year (As of the End of the Year) Situation 2018 2019 2020 2018 2019 2020 1 1,630 2,520 1,290 3,810 1,290 — 2 1,630 1,290 2,920 3,810 2,920 — 3 1,630 2,520 2,640 3,810 2,540 — 4 630 3,130 1,260 4,410 940 — 5 630 3,130 2,210 4,410 2,540 — 6 630 3,130 3,100 5,855 2,870 — 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.)

Exercise 15-3 Finance lease; lessee; balance sheet and income statement effects [LO15-2] On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $559,946 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. The fair value of the warehouse is $3.8. (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. Determine the present value of the lease payments at June 30, 2018 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2018? 3. What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2018? (For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar.)