On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $310 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

Required:
1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2019 are $120 million instead of $30 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.

XYZ Company purchased a land for $ 1,000,000 during 2017 and chooses the revaluation model in accounting for its land.  

Below are the following information:

a ) What is the amount of unrealized gain on revaluation - land for the year 2017? ___Unrealized gain

b ) How much is the accumulated other comprehensive income for the year 2017 to be recognized in the balance sheet? ____accumulated other comprehensive income

c ) What is the amount of unrealized gain on revaluation - land for the year 2018? ____

d ) How much is the impairment loss for the year 2018? ____

e ) How much is the accumulated other comprehensive income for the year 2018 to be recognized in the balance sheet? ____

f ) How much is the recovery of impairment loss and revaluation gain on land for the year 2019? _____

g ) What is the amount of unrealized gain on revaluation - land for the year 2019?  ____

h ) If the land was sold on January 10, 2020, for $ 1,115,000, how much is the gain on sale of land? ____

i ) How much is the accumulated other comprehensive income to be recycled to the retained earnings as a result of the gain on sale of land? ____

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,500,000. During 2018, costs of $2,200,000 were incurred, with estimated costs of $4,200,000 yet to be incurred. Billings of $2,740,000 were sent, and cash collected was $2,450,000.

In 2019, costs incurred were $2,740,000 with remaining costs estimated to be $3,900,000. 2019 billings were $2,990,000, and $2,675,000 cash was collected. The project was completed in 2020 after additional costs of $4,000,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time.

Required:

1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.

2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).

2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).

3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.

3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

What is the Cash flow from Assets?
What is the OCF?
What are the changes in NWC?
What are the Net New Borrowing from Creditors and from Owners?

The shareholders’ equity section of the balance sheet of TNL Systems Inc. included the following accounts at December 31, 2017:

Required:
1. During 2018, TNL Systems reacquired shares of its common stock and later sold shares in two separate transactions. Prepare the entries for both the purchase and subsequent resale of the shares assuming the shares are (a) retired and (b) viewed as treasury stock.

On February 5, 2018, TNL Systems purchased 8 million shares at $12 per share.

On July 9, 2018, the corporation sold 2 million shares at $14 per share.

On November 14, 2020, the corporation sold 2 million shares at $9 per share.

2. Prepare the shareholders’ equity section of TNL Systems’ balance sheet at December 31, 2020, comparing the two approaches. Assume all net income earned in 2018–2020 was distributed to shareholders as cash dividends.

Company A has the following portfolio of Available for sale securities at 12/31/17:

Security Cost Fair Value

ABC Inc. Bonds $35,000 $36,000

XYZ Corp Bonds $25,000 $28,000

DEF Co. Bonds $20,000 $21,000

PQR Inc. Bonds $20,000 $22,000

All these investments were purchased in 2017. In 2018, Company A sold the PQR Inc. bonds for $26,000. The remaining investments were still held at 12/31/18 and had the following fair values: ABC bonds $34,000, XYZ Corp bonds $29,000 and DEF Co. bonds $20,500. Company A had a tax rate of 25% for both 2017 and 2018.

1. For these securities, what will be the net effect on 2017 other comprehensive income (specify increase or decrease)

2. What will be the net effect of the reclassification adjustment reported in 2018's other comprehensive income? Will it increase or decrease the other comprehensive income for the year?

3. For these securities, what will be the net effect on 2018 other comprehensive income? (specify increase or decrease)

Based on the above information, what will be the balance in the accumulated other comprehensive income account on the 12/31/18 balance sheet?

Falwell Company, as lessee, enters into a lease agreement on January 1, 2018, for equipment. The following data are relevant to the lease agreement:

1.         The term of the noncancelable lease is 4 years. Payments of $4,892 are due on January 1 of each year.

2.         The fair value of the equipment on January 1, 2018 is $25,000 and the book value is 20,000. The equipment has an economic life of 6 years. Both parties expect the equipment to have an unguaranteed residual value of $8,250 at the end of the lease term. The equipment reverts to the lessor at the end of the lease term. The equipment is not of a specialized nature and there is no purchase option.

3.         The lessee pays all executory costs.

4.         The interest rate implicit in the lease is 5% and known to Falwell.

1. Indicate the type of lease FalwellCompany has entered into and what accounting treatment is applicable.

(b)    Prepare lease amortization schedule (s) for Falwell Company for the first three years.

(c)    Prepare the journal entries on Falwell’s books that relate to the lease agreement for the following dates:

        1.    January 1, 2018.

        2.    December 31, 2018.

        3.    January 1, 2019.

        4.    December 31, 2019.

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,075,000. During 2018, costs of $2,030,000 were incurred, with estimated costs of $4,030,000 yet to be incurred. Billings of $2,536,000 were sent, and cash collected was $2,280,000.

In 2019, costs incurred were $2,536,000 with remaining costs estimated to be $3,645,000. 2019 billings were $2,786,000, and $2,505,000 cash was collected. The project was completed in 2020 after additional costs of $3,830,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time.

Required:
1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.
2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

Considering the effect that the pandemic may have on some businesses and larger companies, would your decision to lend to American Airlines change when considering the current situation?

American Airlines' biggest liability in their operating income is its contributions to pension plans. It contributed (in millions) $286, $475, and $1,230 in 2017, 2018, and 2019 respectively. Even with these large sums contributed, American Airlines has stayed in the green in net cash earned from operating activities; earning inflows of cash of (in millions) $4,744, $3,533, $3,815 in 2017, 2018 and 2019 respectively.

American has not been as successful in its financing and investing activities. American has financed a lot of aircraft with long term debt. In 2018 they had a capital expenditure and aircraft purchase of $3,745 and $2,354 in the issuance of long-term debt. In 2019 they had capital expenditures and aircraft purchase of $4,268 and $3,960 in the issuance of long-term debt. American Airlines has seen outflows from financing activities of (in millions) $1,145, $1,672, $1,568 in 2017, 2018, and 2019 respectively. It also saw outflows from Investing activities of $3,636, $1,973, and $2,243.

On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $400 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

Required:
1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2019 are $150 million instead of $50 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.