On January 1, 2020, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,800,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board, which gave it the ability to significantly influence Sauk Trail’s operating and investing activities.

The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail’s assets and liabilities follow:

Also, as of January 1, 2020, Sauk Trail’s computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a five-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.

During the next two years, Sauk Trail reported the following net income and dividends:

1. How much of Ridge Road’s $3,800,000 payment for Sauk Trail is attributable to goodwill?

2. What amount should Ridge Road report for its equity in Sauk Trail’s earnings on its income statements for 2020 and 2021?

3. What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2020 and 2021?

1. MIGITSU COMPANY
Comparative Balance Sheets
December 31

Additional information:
1. Net income for 2020 was $97,000.

2. Cash dividends of $34,000 were declared and paid.

3. Bonds payable amounting to $57,000 were redeemed for cash $57,000.

4. Common stock was issued for $42,000 cash.

5. Equipment that cost $45,000 and had a book value of $27,000 was sold for $35,000 during 2020; land was sold at cost.

PART A. Prepare a statement of cash flows for 2020 using the indirect method.

PART B. Compute free cash flow

2.

2020 2019

Cash   $14,900   $10,400

Accounts receivable.   21,500.   23,400

Land.      19,700   25,900

Buildings 70,100   70,100

Accumulated depreciation—buildings. (14,800) (10,700)

   Total $111,400 $119,100

Accounts payable $12,100   $28,300

Common stock   75,400   73,600

Retained earnings 23,900   17,200

Total $111,400   $119,100

Additional information:

1. Net income was $22,400. Dividends declared and paid were $15,700

2. No noncash investing and financing activities occurred during 2020.

3. The land was sold for cash of $4,900.

PART A.) Prepare a statement of cash flows for 2020 using the indirect method.

PART B.) Compute free cash flow

Martinez Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms.

1. Martinez Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $491. The standalone selling price of the tablet is $246 (the cost to Martinez Company is $166). Martinez Company sells the Internet access service independently for an upfront payment of $291. On January 2, 2020, Martinez Company signed 110 contracts, receiving a total of $54,010 in cash.

2. Martinez Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $589. Martinez Company provides the 3-year tablet service plan as a separate product with a standalone selling price of $151. Martinez Company signed 210 contracts for Martinez Bundle B on July 1, 2020, receiving a total of $123,690 in cash.

Prepare any journal entries to record the revenue arrangement for Martinez Bundle A on January 2, 2020, and December 31, 2020.

Prepare any journal entries to record the revenue arrangement for Martinez Bundle B on July 1, 2020, and December 31, 2020.

Repeat the requirements for part (a), assuming that Martinez Company has no reliable data with which to estimate the standalone selling price for the Internet service.

(To record sales)

Pharoah Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Pharoah, has gathered the following data concerning inventory.

At May 31, 2020, the balance in Pharoah’s Raw Materials Inventory account was $456,960, and Allowance to Reduce Inventory to Market had a credit balance of $28,300. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the schedule below.

Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Pharoah’s May 31, 2020, financial statements for inventory at lower-of-cost-or-market as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Assume Garcia uses LIFO inventory costing.

(a1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2020.

(a2) For the fiscal year ended May 31, 2020, determine the amount of the gain or loss that would be recorded due to the change in Allowance to Reduce Inventory to Market.

As of January 1, 2020, the City of Summerhaven began a municipal bus operation. The adjusted trial balance below was prepared as of December 31, 2020:

                                                                                                  Debits        Credits

Cash                                                                                 $      45,000      $

Investments                                                                              85,000

Supplies                                                                                    20,000

Restricted Assets                                                                      30,000

Land                                                                                        100,000

Land Improvements                                                               200,000

Accumulated Depreciation-Land Improvements                                             10,000

Building                                                                                   400,000

Accumulated Depreciation-Building                                                                20,000

Buses                                                                                       500,000

Accumulated Depreciation-Buses                                                                    50,000

Accounts Payable                                                                                             45,000

Salaries Payable                                                                                                15,000

Interest Payable                                                                                                10,000

General Obligation Bonds Payable                                                               800,000

Other Financing Sources-transfer in                                                             400,000

Revenues—charges for services                                                                    360,000

Dividend and interest income                                                                            10,000

Fuel and Supplies Expense                                                        60,000

Salaries Expense                                                                       120,000

Utilities Expense                                                                           50,000

Depreciation Expense                                                                 80,000

Interest Expense                                                                          30,000           _________

Totals                                                                                 $1,720,000       $1,720,000

Additional information:

Ø A transfer of $400,000 was received from the general fund in January, 2020, and was used to acquire capital assets.

Ø General obligation bonds with a face value of $800,000 were sold for $800,000 on March 31, 2020. The bonds pay interest at 5% on March 31 and September 30. The bonds were used to acquire capital assets.

Ø The bond indenture requires that Summerhaven set aside assets for the payment of bond principal. The general obligation bonds are serial bonds, and the first serial payment will not be paid until 2023. Restricted assets consist entirely of investments.

3   Prepare the statement of net position at December 31, 2020.

4   Prepare the capital and related financing activities section of the statement of cash flows for the year ended December 31, 2020.

Please help with problems 3 and 4

On January 1, 2020, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc., for $3,100,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board, which gave it the ability to significantly influence Sauk Trail’s operating and investing activities.

The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail’s assets and liabilities follow:

Also, as of January 1, 2020, Sauk Trail’s computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a four-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.

During the next two years, Sauk Trail reported the following net income and dividends:

1. How much of Ridge Road’s $3,100,000 payment for Sauk Trail is attributable to goodwill?

2. What amount should Ridge Road report for its equity in Sauk Trail’s earnings on its income statements for 2020 and 2021?

3. What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2020 and 2021?

Taco Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Taco, has gathered the following data concerning inventory.

At May 31, 2020, the balance in Headland’s Raw Materials Inventory account was $461,040, and Allowance to Reduce Inventory to Market had a credit balance of $29,040. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the schedule below.

Alcide assigned Burger, an intern from a local college, the task of calculating the amount that should appear on Taco’s May 31, 2020, financial statements for inventory at lower-of-cost-or-market as applied to each item in inventory. Burger expressed concern over departing from the historical cost principle. Assume Burger uses LIFO inventory costing.

(a1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2020.

(a2) For the fiscal year ended May 31, 2020, determine the amount of the gain or loss that would be recorded due to the change in Allowance to Reduce Inventory to Market.

On April 1, 2020, Larkspur Inc. entered into a cost plus fixed fee non-cancellable contract to construct an electric generator for Blue Spruce Corporation. At the contract date, Larkspur estimated that it would take two years to complete the project at a cost of $2,440,000. The fixed fee stipulated in the contract was $549,000. Larkspur appropriately accounts for this contract under the percentage-of-completion method. During 2020, Larkspur incurred costs of $976,000 related to this project. The estimated cost at December 31, 2020, to complete the contract is $1,464,000. Blue Spruce was billed $732,000 under the contract. The billings are non-refundable.

(a)

Correct answer iconYour answer is correct.

Calculate the amount of gross profit to be recognized by Larkspur under the contract for the year ended December 31, 2020. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

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(b)

Show how the contract will be reported on the income statement for the year ended December 31, 2020. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

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Assume all of the same facts as in Part I, except that Soccer Inc. uses the percent of receivables or "aging of receivables" method to determine bad debt expense. I will repeat the facts for your convenience: Soccer Inc. had credit sales of $775,000 during 2020. At the end of 2020, the unadjusted ending balance in Soccer’s Allowance for Bad Debt account was $7,600, and the unadjusted balance in its gross accounts receivable account was $239,000. The company has a policy of writing-off any Account Receivable which is outstanding more than 75 days. As of 12/31/20, Soccer has Accounts Receivable balances totaling $2,000 outstanding over 75 days which need to be written off.

Soccer has created the following aging schedule:

You may round your answers to the nearest dollar.

(A) What journal entry would Soccer record to "Write-Off" Accounts Receivable?

(B) What journal entry would Soccer record to recognize 2020 Bad Debt Expense?

(C) What is the adjusted 12/31/2020 balance of Soccer's Gross Accounts Receivable? **(Show calculation)**

(D) What is the adjusted 12/31/2020 balance of Soccer's Allowance for Bad Debt? **(Show calculation)**

(E) What is the adjusted 12/31/2020 balance of Soccer's Net Accounts Receivable? **(Show calculation)**

Patricia Johnson is the sole owner of Crane Vista Park, a public camping ground near the Crater Lake National Recreation Area. Patricia has compiled the following financial information as of December 31, 2020. Revenues during 2020—camping fees $186,228 Fair value of equipment $186,228 Revenues during 2020—general store 86,463 Notes payable 79,812 Accounts payable 14,632 Expenses during 2020 199,530 Cash on hand 30,595 Accounts receivable 23,278 Original cost of equipment 140,336 (a) Determine Patricia Johnson’s net income from Crane Vista Park for 2020. Net income $enter Net income in dollars (b) Prepare a balance sheet for Crane Vista Park as of December 31, 2020. (List Assets in order of liquidity.) CRANE VISTA PARK Balance Sheet choose the accounting period Assets enter a balance sheet item $enter a dollar amount enter a balance sheet item enter a dollar amount enter a balance sheet item enter a dollar amount select a closing section name for this part of the balance sheet $enter a total amount for this part of the balance sheet Liabilities and Owner’s Equity select an opening name for section one enter a balance sheet item $enter a dollar amount enter a balance sheet item enter a dollar amount select a closing name for section one enter a total amount for this section of the balance sheet select an opening name for section two enter a balance sheet item enter a dollar amount select a closing name for this part of the balance sheet $enter a total amount for this part of the balance sheet