Use the following information to answer MCQ21 to MCQ23

On January 1st, 2018, Crane Construction Corporation signed a contract to construct a building with a contract price of $18,000,000. The company expects to get this contract completed by 2020. Crane uses the percentage of completion method Information relating to the costs, billings, and collections for this contract is as follows:

                                                                             2018                   2019                  2020   

Total costs incurred to date                            $4,500,000            $7,920,000          $13,800,000

Estimated costs to complete                            7,500,000              5,280,000                     -0-

Customer billings to date                                  6,600,000            12,000,000            16,800,000

Collections to date                                            6,000,000            10,500,000            16,500,000

What is the percentage of completion for the year 2019?

Select one:

a. 0.26

b. 0.375

c. 0.66

d. 0.60

What is the gross profit that Crane Cor to recognize in 2020?

Select one:

a. $4,200,000

b. $2,250,000

c. $6,000,000

d. $1,320,000

How much the cost incurred in the year 2019 only:

Select one:

a. $7,920,000

b. $13,200,000

c. $3,420,000

d. $5,280,000

Whispering Winds Corporation manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale—1% of sales; second year after sale—2% of sales; and third year after sale—3% of sales. Sales and actual warranty expenditures for the first three years of business were:

(a)

Calculate the amount that Whispering Winds Ltd. should report as warranty expense on its 2020 income statement and as a warranty liability on its December 31, 2020 SFP using the assurance-type warranty (expense-based approach). Assume that all sales are made evenly throughout each year and that warranty expenditures are also evenly spaced according to the rates above.

Chiefs Construction Company has contracted to build an office building. The construction is scheduled to begin on January 1, 2020, and the estimated time of completion is July 1, 2023. The building cost is estimated to be $20,000,000 and will be billed at $24,000,000. The following data relate to the construction period:

1) Compute the estimated gross profit for 2020, 2021, 2022, and 2023 assuming that the percentage-of-completion method is used.

2) Prepare the necessary journal entries for Chiefs Company for the years 2022 and 2023 under percentage-of-completion method.

3) Prepare the necessary journal entries for Chiefs Company for the years 2022 and 2023 under completed contract method.

Abby runs a printing business and leases a building for which she pays rent of $75,000 per annum. During the year ended 30 June 2020, Abby incurred the following expenses: Painting of the exterior of the building at a cost of $12,000. The original paintwork was peeling and mouldy and didn’t represent the kind of look Abby wanted for her business. Re-surfacing of the dirt carpark with a new non-slip cement to fill in pot-holes and create a safer environment for her customers $8,000 Replace torn awning over the front door for $1,500. The replacement awning was made of the same material as the original awning. Payment of $22,000 for a commercial embroidery machine so that Abby could introduce clothing design and printing into her business. The machine was purchased on 10 February 2020 and installed on 26 February 2020.

Advise Abby if the expenses would be deductible with reference to relevant statute or other supporting documents.

Equity in Net Income and Noncontrolling Interest in Net Income

Palm Resorts acquired its 70 percent interest in Sun City on January 1, 2017, for $41,750,000. The fair value of the 30 percent non‑

controlling interest at the date of acquisition was $14,750,000. Sun City’s date‑of‑acquisition reported net

assets of $5,000,000 were carried at amounts approximating fair value, but it had unrecorded identifiable

intangibles, capitalizable per ASC Topic 805, valued at $7,500,000. These intangibles are determined to

have limited lives, amortized on a straight-line basis over five years. It is now December 31, 2020, and

Sun City reports net income of $10,000,000.

Required

a. Calculate the amount of goodwill originally reported for this acquisition, and its allocation to the

controlling and noncontrolling interests.

b. Calculate equity in net income and the noncontrolling interest in net income for 2020, assuming

goodwill from this acquisition is impaired by $2,000,000 in 2020

Concord Inc. reported the following pretax income (loss) and related tax rates during the years 2019–2022.

Pretax financial income (loss) and taxable income (loss) were the same for all years since Concord began business. The tax rates from 2019–2022 were enacted in 2019.

1. Prepare the journal entries for the years 2020–2022 to record income taxes payable (refundable), income tax expense (benefit), and the tax effects of the loss carryforward. Assume that Concord expects to realize the benefits of any loss carryforward in the year that immediately follows the loss year

2. Prepare the portion of the income statement, starting with “Operating loss before income taxes,” for 2020.

3. Prepare the portion of the income statement, starting with “Income before income taxes,” for 2021.

B1 - Snow Company started operations on February 1, 2020 by depositing $3,000,000 cash in the bank as capital. The following transactions took place during the first month of operations:

February 3: Purchased supplies for $22,500 in cash.

February 9: Purchased equipment for $255,000, paid $105,000 in cash and the remaining amount will be paid after 10 days.

February 12: Received a bill from Dubai News for advertising amounted to $1,650.

February 14: Paid $24,000 salaries in cash.

February 16: Paid $6,000 utilities expense in cash.

February 17: Provided services to customers for $195,000 in cash.

February 19: Paid $150,000 for equipment purchased on February 9.

February 28: The owner withdrew $7,500 cash for personal use.

Required:

1. Prepare the trial balance of Snow Company on February 29, 2020.
2. Prepare the financial statements of Snow Company on February 29, 2020.

B1 - Snow Company started operations on February 1, 2020 by depositing $3,000,000 cash in the bank as capital. The following transactions took place during the first month of operations:

February 3: Purchased supplies for $22,500 in cash.

February 9: Purchased equipment for $255,000, paid $105,000 in cash and the remaining amount will be paid after 10 days.

February 12: Received a bill from Dubai News for advertising amounted to $1,650.

February 14: Paid $24,000 salaries in cash.

February 16: Paid $6,000 utilities expense in cash.

February 17: Provided services to customers for $195,000 in cash.

February 19: Paid $150,000 for equipment purchased on February 9.

February 28: The owner withdrew $7,500 cash for personal use.

Required:

1. Prepare the trial balance of Snow Company on February 29, 2020.
2. Prepare the financial statements of Snow Company on February 29, 2020.

Deneen's Manufacturing plan had 600 adding machines on hand May 1, 2019, each costing $16 each. Purchases and sales during May:

MONTH

DENEEN DOESN'T KEEP PERPETUAL INVENTORY RECORDS. SHE COUNTED 200 ADDING MACHINES ON HAND 5/31/2019.

1. WHAT WAS THE AMOUNT OF ENDING INVENTORY AT MAY 31, 2020, AND COST OF GOODS SOLD FOR THE MONTH ENDED MAY 31, 2019, UNDER THE FIFO METHOD.

2. WHAT WAS THE AMOUNT OF ENDING INVENTORY AT MAY 31, 2020, AND COST OF GOODS SOLD FOR THE MONTH ENDED MAY 31, 2019, UNDER THE LIFO METHOD?

3. WHAT WAS THE AMOUNT OF ENDING INVENTORY AT MAY 31, 2020, AND COST OF GOODS SOLD FOR THE MONTH ENDED MAY 31, 2019, UNDER THE AVERAGE COST METHOD?.

Towing Company manufactures and sells a single product for $40 per unit.
Variable costs are $30 per unit and fixed costs total $168,000. During
2019, the company sold 26,500 units of this product to customers. In
order to improve profitability, the president of Towing Company believes
the following changes should be made in 2020:

1. decrease the selling price of the product by 10%

2. automate a portion of the production process which will reduce
   variable costs by 5% per unit but will add an additional fixed
   cost of $16,310 per year

3. increase advertising by $49,420

Assume these changes are made. 
A) Calculate the number of units that Towing Company must sell in 2020 in order to earn a net income that is 20% greater than the net income earned in 2019.

B) Calculate the number of units that Towing Company must sell in 2020 in order to earn a target profit equal to 12% of sales.