Information for the economy of Pogo

2019

• Interest payments received from Foreign on Foreign assets owned by Pogo:                     $45M
• Interest payments paid to Foreign citizens on Pogo assets owned by Foreign:                   $48M
• Federal Reserve Bank of Pogo’s holding of interest-free Foreign assets, start of 2019:   $85M

2020

• Interest payments received from Foreign on Foreign assets owned by Pogo:                     $46M
• Interest payments paid to Foreign citizens on Pogo assets owned by Foreign:                   $52M
• Federal Reserve Bank of Pogo’s holding of interest-free Foreign assets, start of 2020:   $77M

Assumptions:            

• Interest rate on Foreign assets is 5% and the Interest rate on Pogo assets is 8% for both 2019 & 2020.
• Foreign central bank does not hold Pogo assets
• There are no Foreigners working in Pogo and no Pogo citizens working in Foreign during these years.

Questions:

1. What is Pogo’s international net worth at the start of 2019? Show your work.

2. What is Pogo’s current account, CA, in 2019. Show your work.

3. What is Pogo’s trade account, TA, in 2019. Show your work.

4. What is Pogo’s international net worth at the start of 2020? Show your work.

The Lynbrook Rentals Company offers credit terms to all of its customers. At the end of 2019, accounts receivables totaled $3,400,000. During 2020 credit sales were $2,100,000 and cash collections from customers were $3,700,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2020 and $70,000 in receivables were written off during the year as uncollectible. In addition, $20,000 was collected from a customer whose account was written off in 2019. The allowance for uncollectible accounts is determined by an ageing of accounts receivable. An aging of accounts receivable at December 31, 2020, reveals the following:

Age Group   Percentage of Year-end Receivable in Group Percent Uncollectible

0-60 days 55%   5%

61-90 days 30 15

91-120 days 10 45

Over 120 days 5 60

Required:

a. Prepare journal entries to record the write-off of receivables, collection of the accounts receivable previously written off, and the year-end adjusting entry for bad debt expense.
b. Show how accounts receivables would be presented in the 2020 year-end balance sheet?

5. Real versus nominal GDP

Consider a simple economy that produces two goods: pencils and oranges. The following table shows the prices and quantities of the goods over a three-year period.

Use the information from the preceding table to fill in the following table.

From 2019 to 2020, nominal GDP (Decreased/Increased), and real GDP(Decreased/Increased) .

The inflation rate in 2020 was (-47.5%, -0.5%, 47.5%, 52.5%, 190.5%) .

Why is real GDP a more accurate measure of an economy's production than nominal GDP?

- Real GDP does not include the value of intermediate goods and services, but nominal GDP does.

- Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.

-Real GDP is not influenced by price changes, but nominal GDP is.

Interest During Construction

Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

• Capitalization period: January 1, 2019, to June 30, 2020
• Expenditures on project:

  2019:
  	January 1	$ 516,000
  	May 1	477,000
  	October 1	648,000
  2020:
  	March 1	1,404,000
  	June 30	684,000

• Amounts borrowed and outstanding:
     $1.7 million borrowed at 10%, specifically for the project
     $8 million borrowed on July 1, 2018, at 12%
     $13 million borrowed on January 1, 2017, at 6%

Required:

Note: Round all final numeric answers to two decimal places.

1. Compute the amount of interest costs capitalized each year.

   Capitalized interest, 2019	$ fill in the blank 1
   Capitalized interest, 2020	$ fill in the blank 2

2. If it is assumed that the production complex has an estimated life of 20 years and a residual value of $0, compute the straight-line depreciation in 2020.

   $ fill in the blank 3

3. Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report   income than if it had not capitalized interest. In future periods, the same company will report   income than if it had not capitalized interest.

Problem 18-09 Concord Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. It has been estimated that the complex will cost $606,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $891,000. The following data pertain to the construction period. 2020 2021 2022 Costs to date $260,580 $466,620 $618,000 Estimated costs to complete 345,420 139,380 –0– Progress billings to date 272,000 551,000 891,000 Cash collected to date 242,000 501,000 891,000 (a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period. (If the answer is 0, please enter 0. Do not leave any fields blank.) Gross profit recognized in 2020 $ Gross profit recognized in 2021 $ Gross profit recognized in 2022 $ (b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period. (If the answer is 0, please enter 0. Do not leave any fields blank.) Gross profit recognized in 2020 $ Gross profit recognized in 2021 $ Gross profit recognized in 2022 $ Please show working. Thank you.

Waterway Windows manufactures and sells custom storm windows for three-season porches. Waterway also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Waterway enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,470 and chooses Waterway to do the installation. Waterway charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Waterway $1,940 (which equals the standalone selling price of the windows, which have a cost of $1,050) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Waterway completes installation on October 15, 2020, and the customer pays the balance due.

Waterway estimates the standalone selling price of the installation based on an estimated cost of $450 plus a margin of 30% on cost.

Prepare the journal entries for Waterway in 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answer to 0 decimal places, e.g. 5,125.)

A) Whispering, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow.

Compute the value of the 2020 and 2021 inventories using the dollar-value LIFO method.

B)

The following is a record of Sheffield Company’s transactions for Boston Teapots for the month of May 2020.

Assuming that perpetual inventories are not maintained and that a physical count at the end of the month shows 655 units on hand, what is the cost of the ending inventory using (1) FIFO and (2) LIFO?

Assuming that perpetual records are maintained and they tie into the general ledger, calculate the ending inventory using (1) FIFO and (2) LIFO.

Presented below are data taken from the records of Blue Company.

Additional information:

Prepare a statement of cash flows for the year 2020 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)