acct ii

111. c $400,000 × 30% = $120,000. 112. b $1,000,000 + $120,000 - ($250,000 × 30%) = $1,045,000. 113. c $1,045,000 - ($150,000 × 30%) + ($500,000 × 50% × 30%) = $1,075,000. $660,000 - ($1,075,000 ÷ 2) = $122,500.

Rich, Inc. acquired 30% of Doane Corporation's voting stock on January 1, 2021 for $1,000,000. During 2021, Doane earned $400,000 and paid dividends of $250,000. Rich's 30% interest in Doane gives Rich the ability to exercise significant influence over Doane's operating and financial policies. During 2022, Doane earned $500,000 and paid cash dividends of $150,000 on April 1 and $150,000 on October 1. On July 1, 2022, Rich sold half of its stock in Doane for $660,000 cash. 111. Before income taxes, what amount should Rich include in its 2021 income statement as a result of the investment? a. $400,000. b. $250,000. c. $120,000. d. $75,000. 112. The carrying amount of this investment in Rich's December 31, 2021 balance sheet should be a. $1,000,000. b. $1,045,000. c. $1,120,000. d. $1,150,000. 113. What should the gain be on sale of this investment in Rich's 2022 income statement? a. $160,000. b. $137,500. c. $122,500. d. $100,000.

b ($22,400,000 × 45%) - ($21,000,000 × 15%) = $6,930,000. $14,700,000

*124. Green Construction Co. has consistently used the percentage-of-completion method of recognizing revenue. During 2021, Green entered into a fixed-price contract to construct an office building for $28,000,000. Information relating to the contract is as follows: At December 31 2021 2022 Percentage of completion 15% 45% Estimated total cost at completion $21,000,000 $22,400,000 Gross profit recognized (cumulative) 1,400,000 3,360,000 Contract costs incurred during 2022 were a. $6,720,000. b. $6,930,000. c. $7,350,000. d. $10,080,000.

109. c

109. At December 31, 2021, Jeter Corporation had the following debt securities that were purchased during 2021, its first year of operation: Fair Unrealized Cost Value Gain (Loss) Trading Securities: Security A $ 85,000 $ 65,000 $(20,000) B 15,000 20,000 5,000 Totals $100,000 $ 85,000 $(15,000) Available-for-Sale Securities: Security Y $ 70,000 $ 80,000 $ 10,000 Z 85,000 55,000 (30,000) Totals $155,000 $135,000 $(20,000) All market declines are considered temporary. Fair value adjustments at December 31, 2021 should be established with a corresponding charge against Income Stockholders' Equity a. $40,000 $ 0 b. $25,000 $30,000 c. $15,000 $20,000 d. $15,000 $ 0

114. a $1,170,000 - ($700,000 × 25%) + ($280,000 × 25%) = $1,065,000.

114. On January 1, 2021, Reston Company purchased 25% of Ace Corporation's common stock; no goodwill resulted from the purchase. Reston appropriately carries this investment at equity and the balance in Reston's investment account was $1,170,000 at December 31, 2021. Ace reported net income of $700,000 for the year ended December 31, 2021, and paid cash dividends on common stock totaling $280,000 during 2021. How much did Reston pay for its 25% interest in Ace? a. $1,065,000. b. $1,240,000. c. $1,275,000. d. $1,415,000.

d $21,000,000 - $8,100,000 - $9,150,000 = $3,750,000.

During 2021, Gates Corp. started a construction job with a total contract price of $21,000,000. The job was completed on December 15, 2022. Additional data are as follows: 2021 2022 Actual costs incurred during the year $8,100,000 $9,150,000 Estimated remaining costs 8,100,000 — Billed to customer 7,200,000 13,800,000 Received from customer 6,000,000 14,400,000 Under the completed-contract method, what amount should Gates recognize as gross profit for 2022? a. $1,350,000 b. $1,875,000 c. $2,850,000 d. $3,750,000

d —————— × ($49,000,000 - $44,100,000) = $1,633,333.

Bruner Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In 2021, Bruner started work on a $49,000,000 construction contract that was completed in 2022. The following information was taken from Bruner's 2021 accounting records: Progress billings $15,400,000 Costs incurred 14,700,000 Collections 9,600,000 Estimated costs to complete 29,400,000 What amount of gross profit should Bruner have recognized in 2021 on this contract? a. $4,900,000 b. $3,266,667 c. $2,450,000 d. $1,633,333

110. d Conceptual.

On December 29, 2022, James Company sold a debt security that had been purchased on January 4, 2021. James owned no other debt securities. An unrealized holding loss was reported in the 2021 income statement. A realized gain was reported in the 2022 income statement. Was the debt security classified as available-for-sale and did its 2021 market price decline exceed its 2022 market price recovery? 2021 Market Price Decline Exceeded 2022 Available-for-Sale Market Price Recovery a. Yes Yes b. Yes No c. No Yes d. No No

115. b *$14,000 - **$13,000 - ***$25,000 = $24,000 loss. *($186,000 - $172,000) **($119,000 - $132,000) ***($263,000 - $288,000)

On December 31, 2021, Patel transferred its investment in security C from trading to available-for-sale because Patel intends to retain security C as a long-term investment. What total amount of gain or loss on its securities should be included in Patel's income statement for the year ended December 31, 2021? a. $1,000 gain. b. $24,000 loss. c. $25,000 loss. d. $38,000 loss.

107. d $936,000 - $16,000 = $920,000 15 $920,000 - ($120,000 × — ) = $896,000. 75

On October 1, 2020, Wenn Company purchased 800 of the $1,000 face value, 8% bonds of Loy, Inc., for $936,000, including accrued interest of $16,000. The bonds, which mature on January 1, 2027, pay interest semiannually on January 1 and July 1. Wenn used the straight-line method of amortization and appropriately recorded the bonds as available-for-sale. On Wenn's December 31, 2021 balance sheet, the carrying value of the bonds is a. $920,000. b. $912,000. c. $908,800. d. $896,000.

108. d $180,000 - $160,000 = $20,000.

Valet Corporation began operations in 2021. An analysis of Valet's debt securities portfolio acquired in 2021 shows the following totals at December 31, 2021 for trading and available-for-sale debt securities: Trading Available-for-Sale Securities Securities Aggregate cost $180,000 $220,000 Aggregate fair value 160,000 190,000 What amount should Valet report in its 2021 income statement for unrealized holding loss? a. $50,000. b. $10,000. c. $30,000. d. $20,000.