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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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

At the end of 2020, the records of Block Corporation reflected the following.

a. What EPS presentation is required—basic, diluted, or both?

b. Compute the required EPS amount(s).

• Note: Round earnings per share amount to two decimal places.

c. Compute the required EPS amount(s), assuming that the preferred stock is cumulative.

• Note: Round earnings per share amount to two decimal places.

Taxable income and pretax financial income would be identical for Bridgeport Co. except for its treatments of gross profit on installment sales and estimated costs of warranties. The following income computations have been prepared.

The tax rates in effect are 2019, 40%; 2020 and 2021, 45%. All tax rates were enacted into law on January 1, 2019. No deferred income taxes existed at the beginning of 2019. Taxable income is expected in all future years.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019, 2020, and 2021. (Credit account titles are automatically indented when 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.)

1. Financial institutions in the U.S. economy

Suppose Paolo would like to invest $2,000 of his savings.

One way of investing is to purchase stock or bonds from a private company.

Suppose TouchTech, a hand-held computing firm, is selling stocks to raise money for a new lab—a practice known as _____ (equity or debt) finance. Buying a share of TouchTech stock would give Paolo _________ (a claim to partial ownership in/ an IOU, or promise to pay, from) the firm. In the event that TouchTech runs into financial difficulty, _______ (The bondholders/ Paolo and other stockholders) will be paid first.

Suppose Paolo decides to buy 100 shares of TouchTech stock.

Which of the following statements are correct? Check all that apply.

The price of his shares will rise if TouchTech issues additional shares of stock.

The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock.

Expectations of a recession that will reduce economy-wide corporate profits will likely cause the value of Paolo's shares to decline.

Alternatively, Paolo could invest by purchasing bonds issued by the U.S. government.

Assuming that everything else is equal, a corporate bond issued by an electronics manufacturer most likely pays a ____ (lower/higher) interest rate than a municipal bond issued by a state.

Owl Vision Corporation (OVC) is a North Carolina corporation engaged in the manufacture and sale of contact lenses and other optical equipment. The company handles its export sales through sales branches in Belgium and Singapore. The average tax book value of OVC’s assets for the year was $220 million, of which $176 million generated U.S. source income and $44 million generated foreign source income. The average fair market value of OVC’s assets was $264 million, of which $198 million generated U.S. source income and $66 million generated foreign source income. OVC’s total interest expense was $22 million. (Enter your answers in millions.)   a. What amount of the interest expense will be apportioned to foreign source income under the tax book value method? (Round your final answer to 1 decimal place.) b. What amount of the interest expense will be apportioned to foreign source income under the fair market value method? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) c. If OVC wants to maximize its foreign tax credit limitation, which method produces the better outcome?

Fair market value method

Tax book value method

37/ Madison Corporation purchased 40% of Jay Corporation for $400,000 on January 1. On June 20 of the same year, Jay Corporation declared total cash dividends of $100,000. At year-end, Jay Corporation reported net income of $500,000. The balance in Madison Corporation's Long-Term Investment-Jay Corporation account as of December 31 should be:

Multiple Choice

$640,000.

$240,000.

$740,000.

$400,000.

$560,000.

38/Segmental Manufacturing owns 30% of Glesson Corp. stock. Glesson pays a total of $51,500 in cash dividends for the period. Segmental's entry to record the dividend transaction would include a:

Multiple Choice

Credit to Cash for $15,450.

Credit to Investment Revenue for $51,500.

Credit to Long-Term Investments for $15,450.

Debit to Cash for $51,500.

Debit to Long-Term Investments for $15,450.

39/ If the exchange rate for Canadian and U.S. dollars is 0.83777 to 1, this implies that 4 Canadian dollars will buy ____ worth of U.S. dollars. (Select the nearest answer.)

Multiple Choice

$0.20944

$0.83777

$1.83777

$3.35108

None of these.

40/ A company had net income of $41,000, net sales of $310,000, and average total assets of $210,000. Its profit margin and total asset turnover were respectively:

Multiple Choice

2.02%; 1.48.

13.23%; 1.48.

13.23%; 0.20.

1.48%; 13.23.

1.48%; 0.20.

Tesla, Inc. is an American automotive company that specializes in electric car manufacturing. The company and Elon Musk, it’s current CEO, has been an innovator in the United States automobile industry. Tesla has used technology as one of it’s driving factors. They provide online software updates and have open source technology, to an extent. Tesla’s production efficiency and sales have increased the last few years. During 2018 & 2019, they were able to achieve some quarters profitability.

Despite of these improvements, the company has had to deal with a number of challenges. Among them:

-   Elon Musk is a dynamic leader; however, he is also unpredictable. For example, in 2018 Musk reported that the company may be going private. The statements were deemed to be misleading for a publicly traded company. Musk and the company were fined a total of $40 million dollars and Musk was not allowed to serve as Director of the Tesla Board for at least three years.
-   Although production has improved, it is still has not met expectations. The company has had many issues which include, assembly line issues, battery integration, and delivery logistics. During this time, Musk has made statements regarding production which has over promised to the market.
-   Tesla had achieved quarterly profitability for some quarters during 2018 and 2019. They had losses for years. Obviously, this is a problem but not unusual for a manufacturing company that takes a number of years to develop a market. The issue is that with accumulating debt, the unpredictability of production and costs have caused major concerns in the investor market place.

Operating a company the size of Tesla is a major task. It takes many teams, with numbers of functions. Address the following questions as advice for the Tesla Board of Directors

1.   The leader of the company, Elon Musk, has created issues on his own for the company. What structure could be put in place to minimize negative impacts?
2.   Chapter 4 of the Group Dynamics for Teams text addresses group cohesion and team roles. What concepts could be utilized to improve the Board’s results?
3.   Tesla was founded in 2003. What factors would you consider to be critical when forming the initial board?

Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $662,000; Raw Materials Inventory, $61,000; Work in Process Inventory, $27,000; Finished Goods Inventory, $61,000; Common Stock, $584,000; and Retained Earnings, $227,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

1. Paid $31,000 of research and development costs.

2. Paid $57,000 for raw materials that will be used to make eBook readers.

3. Placed $83,000 of the raw materials cost into the process of manufacturing eBook readers.

4. Paid $65,000 for salaries of selling and administrative employees.

5. Paid $99,000 for wages of production workers.

6. Paid $97,000 to purchase equipment used in selling and administrative offices.

7. Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $17,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($97,000 – $17,000) ÷ 8 = $10,000.

8. Paid $106,000 to purchase manufacturing equipment.

9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $22,000 salvage value and a seven-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($106,000 – $22,000) ÷ 7 = $12,000.

10. Paid $45,000 for rent and utility costs on the manufacturing facility.

11. Paid $72,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).

12. Completed and transferred eBook readers that had total cost of $249,000 from work in process inventory to finished goods.

13. Sold 850 eBook readers for $430,000.

14. It cost Antioch $161,500 to make the eBook readers sold in Event 13.

Prepare a balance sheet for the year.

Included in the December 31, 2015, Jacobi Company balance sheet was the following shareholders’ equity section:

Jacobi Company Balance Sheet (Shareholders' Equity) December 31, 2015

1 Contributed Capital:

2 Preferred stock, 6%, $100 par $200,000.00

3 Additional paid-in capital on preferred stock 12,000.00 $212,000.00

4 Common stock, $5 par $150,000.00

5 Additional paid-in capital on common stock 240,000.00 390,000.00

6 Total contributed capital $602,000.00

7 Retained earnings 627,000.00

8 Accumulated other comprehensive income (loss):

9 Unrealized decrease in value of available-for-sale securities (41,000.00)

10 Total contributed capital, retained earnings, and accumulated other comprehensive income $1,188,000.00

11 Less: Treasury stock (1,000 shares of common stock at cost, acquired on 2/3/2015) (20,000.00)

12 Total Shareholders’ Equity $1,168,000.00

The company engaged in the following stock transactions during 2016:

Jan. 4 Paid the semiannual dividend on the outstanding preferred stock and a $1.60 per share annual dividend on the outstanding common stock. These dividends had been declared on December 1, 2015.

5 Issued 500 shares of preferred stock at $110 per share.

22 Issued 4,000 shares of common stock at $23 per share.

Apr. 2 Reissued 700 shares of treasury stock at $24 per share.

May 14 Declared a 10% stock dividend on the outstanding common stock, payable on June 29. The common stock is currently selling for $25 per share.

Jun. 4 Declared the semiannual cash dividend on the outstanding preferred stock, payable on July 5.

29 Issued the stock dividend declared on May 14.

Jul. 5 Paid the cash dividend declared on June 4.

20 Split the common stock 2-for-1 and reduced the par value to $2.50 per share.

Aug. 3 Declared a property dividend, payable to common shareholders on September 14. The dividend consists of an available-for-sale investment in 50 Drot Company bonds. The bonds had been acquired for $45,000, but have a carrying value of $30,000. The bonds are currently selling for $20,000.

Sep. 14 Paid the property dividend declared on August 3.

Dec. 3 Declared the semiannual cash dividend on the outstanding preferred stock and a $0.90 per share annual dividend on the outstanding common stock.

Required:

1. Prepare journal entries to record the preceding transactions.

2. Prepare the December 31, 2016, shareholders’ equity section (assume that 2016 net income was $270,000).