Brandlin Company of Anaheim, California, purchases materials from a foreign supplier on December 1, 2017, with payment of 27,000 korunas to be made on March 1, 2018. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2017, Brandlin enters into a forward contract to purchase 27,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows:

Brandlin’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Brandlin must close its books and prepare financial statements at December 31.

1. a-1. Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency payable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars. (12 entries)

2. a-2. Assuming that the purchased parts became a part of the cost of goods sold in 2017, what is the impact on 2017 net income?

3. a-3. What is the impact on 2018 net income?

4. a-4. What is the impact on net income over the two accounting periods?

5. b-1. Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for these transactions in U.S. dollars. (12 entries)

6. b-2. Assuming that the purchased parts became a part of the cost of goods sold in 2017, what is the impact on net income in 2017 and in 2018?

7. b-3. What is the impact on net income over the two accounting periods?

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:

Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a.In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b.In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
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.

5. 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.

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:

Westgate recognizes revenue over time according to percentage of completion.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
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.

5. 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.

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:

Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

Required:

1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
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.

5. 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.

The comparative statements of financial position of Mikos Inc. as at December 31, 2017 and 2018, and its statement of earnings for the year ended December 31, 2018, are presented below: MIKOS INC. Comparative Statements of Financial Position December 31 2018 2017 Assets Cash $ 10,500 $ 18,500 Short-term investments 70,500 39,500 Accounts receivable 75,500 32,000 Inventories, at cost 57,000 41,500 Prepaid expenses 5,500 9,000 Land 51,000 77,500 Property, plant, and equipment, net 286,000 186,500 Intangible assets 25,500 31,000 $ 581,500 $ 435,500 Liabilities and Shareholders’ Equity Accounts payable $ 18,500 $ 43,000 Income tax payable 9,000 2,500 Accrued liabilities 11,500 -0- Long-term notes payable 125,000 180,000 Contributed capital 230,000 67,500 Retained earnings 187,500 142,500 $ 581,500 $ 435,500 MIKOS INC. Statement of Earnings For the Year Ended December 31, 2018 Sales $ 895,000 Cost of sales $ 445,000 Amortization expense—intangible assets 5,500 Depreciation expense—property, plant, and equipment 34,500 Operating expenses 236,000 Interest expense 13,500 734,500 Earnings before income taxes 160,500 Income tax expense 48,150 Net earnings $ 112,350 Additional information is as follows: a. Land was sold for cash at its carrying amount. b. The short-term investments will mature in February 2019. c. Cash dividends were declared and paid in 2018. d. New equipment with a cost of $167,500 was purchased for cash, and old equipment was sold at its carrying amount. e. Long-term notes of $17,500 were paid in cash, and notes of $37,500 were converted to shares. Required: 1. Prepare a statement of cash flows for Mikos Inc. for the year ended December 31, 2018 by using the indirect method. (Negative answers should be indicated by a minus sign.)

Income statement and balance sheet data for The Athletic Attic are provided below.

THE ATHLETIC ATTIC
Income Statements
For the years ended December 31

2019 2018

  Net sales $11,800,000 $10,300,000

  Cost of goods sold $7,700,000 $6,400,000

       Gross profit $4,100,000 $3,900,000

  Expenses:  

      Operating expenses $1,700,000 $1,650,000

      Depreciation expense $200,000 $200,000

      Interest expense $50,000 $50,000

      Income tax expense $520,000 $450,000

        Total expenses $2,470,000 $2,350,000

  Net income    $1,630,000 $1,550,000

THE ATHLETIC ATTIC
Balance Sheets
December 31

2019 2018 2017

  Assets   

  Current assets:   

      Cash $235,000 $164,000 $224,000   

      Accounts receivable $1,000,000 $750,000 $770,000   

      Inventory $1,735,000 $1,365,000 $1,035,000   

      Supplies $140,000 $110,000 $85,000   

  Long-term assets:   

        Equipment $1,500,000 $1,500,000 $1,500,000   

        Less: Accumulated

depreciation (700,000) (500,000) (300,000)

Total assets $3,910,000 $3,389,000 $3,314,000   

  Liabilities and Stockholders' Equity   

  Current liabilities:   

      Accounts payable $204,000 $135,000 $120,000   

      Interest payable $5,000 $0 $5,000   

      Income tax payable $50,000 $45,000 $40,000   

Long-term liabilities:   

      Notes payable $600,000 $600,000 $600,000   

  Stockholders' equity:   

      Common stock $700,000 $700,000 $700,000   

      Retained earnings $2,351,000 $1,909,000 $1,849,000   

         Total liabilities and

stockholders’ equity $3,910,000 $3,389,000 $3,314,000   

Required:

1. Calculate the following risk ratios for 2018 and 2019: (Round your answers to 1 decimal place.)

2018 2019

Receivables Turnover Ratio    ___ times ___ times

Inventory Turnover Ratio ___ times ___ times

Current Ratio    ___ to 1 ___ to 1

Debt to Equity Ratio ___ % ___ %

2. Calculate the following profitability ratios for 2018 and 2019: (Round your answers to 1 decimal place.)

2018 2019

Gross Profit Ratio ___ % ___ %

Return on Assets ___ % ___ %

Profit Margin ___ % ___ %

Asset Turnover ___ times ___ times

During 2016 (its first year of operations) and 2017, Batali Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Batali decided to change to the average method for both financial reporting and tax purposes.

Income components before income tax for 2018, 2017, and 2016 were as follows ($ in millions):

Dividends of $20 million were paid each year. Batali’s fiscal year ends December 31.

Required:
1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. (Ignore income taxes.)
2. Prepare the 2018–2017 comparative income statements.
3. & 4. Determine the balance in retained earnings at January 2017 as Batali reported using FIFO method and determine the adjustment of balance in retained earnings as on January 2017 using average method instead of FIFO method.

2.

3.Retained earnings balance previously reported using FIFO, Jan. 1, 2017:  

Adjustment to balance for change in inventory methods:

Retained earnings balance using average method, Jan. 1, 2017:

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: 2018 2019 2020 Cost incurred during the year $ 1,491,000 $ 3,195,000 $ 2,655,400 Estimated costs to complete as of year-end 5,609,000 2,414,000 0 Billings during the year 1,100,000 3,586,000 5,314,000 Cash collections during the year 900,000 2,700,000 6,400,000 Westgate Construction uses the completed contract method of accounting for long-term construction contracts. Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred). 2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred). 2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred). 3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract. 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. 2018 2019 2020 Cost incurred during the year $ 2,590,000 $ 3,895,000 $ 3,290,000 Estimated costs to complete as of year-end 5,790,000 3,290,000 0 5. 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. 2018 2019 2020 Cost incurred during the year $ 2,590,000 $ 3,895,000 $ 4,185,000 Estimated costs to complete as of year-end 5,790,000 4,290,000 0

American Surety and Fidelity buys and sells securities expecting to earn profits on short-term differences in price. For the first 11 months of 2018, gains from selling trading securities totaled $4 million, losses were $11 million, and the company had earned $5 million in investment revenue. The following selected transactions relate to American's trading account and equity securities investment account during December 2018, and the first week of 2019. The company's fiscal year ends on December 31. No trading securities were held by American on December 1, 2018.

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:

Westgate recognizes revenue over time according to percentage of completion.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
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.

5. 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.