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 $ 2,580,000 $ 4,042,000 $ 2,175,800 Estimated costs to complete as of year-end 6,020,000 1,978,000 0 Billings during the year 2,060,000 4,562,000 3,378,000 Cash collections during the year 1,830,000 4,200,000 3,970,000 Westgate recognizes revenue over time according to percentage of completion. rev: 09_15_2017_QC_CS-99734 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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.) 2018 2019 2020 Cost incurred during the year $ 2,580,000 $ 3,830,000 $ 3,230,000 Estimated costs to complete as of year-end 6,020,000 3,130,000 0

Required information

[The following information applies to the questions displayed below.]

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.

rev: 09_15_2017_QC_CS-99734

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).

On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,225,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $860,000, retained earnings of $410,000, and a noncontrolling interest fair value of $525,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing.

During the next two years, Smashing reported the following:

Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 30 percent of the current year purchases remain in Smashing's inventory.

1. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December
2. Prepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing.

Bramble 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 Bramble began business. The tax rates from 2019–2022 were enacted in 2019.

(a)

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 Bramble expects to realize the benefits of any loss carryforward in the year that immediately follows the loss year. (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. The financial statements of Isabella Painting Supply are shown in the table below. For simplicity, “Costs” include interest. Assume that Isabella’s assets are proportional to its sales. (10 points)

a. Find Isabella’s required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 35% in revenue, expenses, and assets in 2020. Assume the tax rate remains constant.  

b. If Isabella Painting Supply chooses not to issue new shares of stock, what is the value of debt in 2020?

c. Suppose that the firm plans instead to increase long-term debt only to $3,350 and does not wish to issue any new shares of stock. What must be the 2020 dividend payment now?

The financial statements of Isabella Painting Supply are shown in the table below. For simplicity, “Costs” include interest. Assume that Isabella’s assets are proportional to its sales.

a. Find Isabella’s required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 35% in revenue, expenses, and assets in 2020. Assume the tax rate remains constant.  

b. If Isabella Painting Supply chooses not to issue new shares of stock, what is the value of debt in 2020?

c. Suppose that the firm plans instead to increase long-term debt only to $3,350 and does not wish to issue any new shares of stock. What must be the 2020 dividend payment now?

PA10-7 (Supplement 10B) Recording Bond Issue, Interest Payments (Effective-Interest Amortization), and Early Bond Retirement [LO 10-S2]

On January 1, 2018, Surreal Manufacturing issued 520 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $505,572. Surreal uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Required:

1. 1. Prepare a bond amortization schedule.

2. 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the interest and face value payment on December 31, 2020 and the bond retirement. Assume the bonds are retired on January 1, 2020, at a price of 101.

The controller of Trenshaw Company wants to improve the company’s control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2020.

Prepare cash budget for a month.

Trenshaw Company wants to keep a minimum cash balance of $25,000.

Instructions

a. Prepare a cash budget for the month ended July 31, 2020, and indicate how much money, if any, Trenshaw Company will need to borrow to meet its minimum cash requirement.

b. Explain how cash budgeting can reduce the cost of short-term borrowing.

(CGA adapted)

For this problem, use an annual interest rate of 4%.

On 1/1/2020, you buy a perpetuity paying you $10,000 at the beginning of each year, commencing on 1/1/2020.  (Recall that a perpetuity is an annuity that does not end.)

(a)        Calculate the present value of the perpetuity as of 1/1/2020.

(b)       After receiving exactly ten payments, you exchange the perpetuity on 1/1/2030 for an annuity paying $x at the beginning of each year for 20 years, commencing on 1/1/2030.  (Note:  Since you have received exactly ten payments, you exchange your perpetuity on 1/1/2030 before receiving the payment of $10,000 on that day.)

What is the present value of your perpetuity on 1/1/2030 when you exchange it?

(c)        Without any calculations, conclude whether $x is greater than, equal to, or less than $10,000.  Explain.

(Note:  A correct answer without a correct explanation earns no credit.)

(d)       Calculate $x.

Selected financial statement information and additional data for Jasmine Co. is presented below. Prepare a statement of cash flows for the year ending December 31, 2020

December 31

2020 2019

Cash $65,000 $42,000

Accounts receivable (net) 144,200 84,000

Inventory 206,600 168,000

Land 21,000 58,800

Equipment…………………………………. 789,600 504,000

A/D- Eqp………....................................... 115,600 84,000

Accounts payable 86,000 50,400

Notes payable - short-term 29,400 67,200

Notes payable - long-term 302,400 168,000

Common stock 487,200 420,000

Retained earnings 205,800 67,200

*change in inventory is an operating activity*

Additional data for 2020:

1. Net income was $220,200.

2. Depreciation was $?

3. Land was sold at its original cost.

4. Dividends of $81,600 were paid.

5. Equipment was purchased for $84,000 cash.

6. A long-term note for $134,400 issued for equipment purchase.

7. New owners invested in company by purchasing 100 shares of Common stock for cash.