Question 1 (a) On March 1, 2010, Lancelot Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,500,000 and will take 3 years to complete. The contract price was $2,800,000. The following information pertains to the construction period: 2010 2011 2012 Yearly Costs $700,000 $1,100,000 $860,000 Estimated costs to complete 1,800,000 750,000 0 Progress billings to date 1,000,000 2,100,000 2,800,000 Yearly Cash collected 980,000 1,020,000 700,000 Required: (Round percentages to exclude decimal points and round dollar amounts to exclude cents) Assuming the percentage-of-completion revenue recognition method is used. i. Compute the amount of gross profit to be recognized each year (23 points) ii. Prepare all necessary journal entries for 2010, 2011 and 2012. (30 points) iii. Prepare a partial balance sheet for December 31, 2011, showing the balances in the receivables and inventory accounts. (12 points) (b) Assuming that the completed?contract revenue recognition method was used, prepare all necessary journal entries for 2012. (10 points) Question 2 (a) Harvard Company reports pre-tax financial income of $90,000 for 2010. The following items cause taxable income to be different than pre-tax financial income: ? Depreciation on the tax return is greater than depreciation on the income statement by $15,000 ? Rent collected on the tax return is greater than rent earned on the income statement by $28,000 ? Fines for pollution appear as an expense of $10,000 on the income statement Harvard?s tax rate is 40% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2010. Required: i. Compute taxable income and income taxes payable for 2010. (14 points) ii. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2010. (20 points) iii. Prepare the income tax expense section of the income statement for 2010, beginning with the line ?Income before income taxes?. (12 points) iv. Compute the effective income tax rate for 2010. (6 points) (b) For both GAAP and tax purposes, Raymond Incorporated reported the following pre-tax income (loss) for each of the years: Year Pre-tax income Tax Rate 2008 $80,000 35% 2009 100,000 35% 2010 (300,000) 40% 2011 118,000 30% Required: Assuming that the carry back provision is used, prepare the journal entries for years 2008 ? 2011 to record income tax expense (benefit) and income tax payable (refundable), and the tax effects of the loss carry back and loss carry forward. Also assume that it is more likely than not that three-quarters of the benefits of the loss carry forward will not be realized. . (23 points) Question 3 (a) Water Inc has the following balances at 1/1/10 that relate to its defined-benefit pension plan: Projected benefit obligation $700,000 Pension liability 200,000 Accumulated OCI (PSC) 150,000 During 2010, the following additional data is available: Service Cost for 2010 $84,000 Settlement rate 10% Actual return on plan assets in 2010 61,000 Amortization of prior service cost 9,000 Expected return on plan assets 66,000 Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions 86,000 Contributions in 2010 100,000 Benefits paid to retirees in 2010 80,000 Required: i. Compute pension expense for the year 2010 by preparing a pension worksheet. (45 points) ii. Prepare the journal entry for pension expense for 2010. (10 points) (b) George Incorporated has the following balances as of the beginning of each year: Year Plan Assets Pension Asset (Liability) 2010 $1,800,000 $(300,000) 2011 2,400,000 150,000 2012 2,700,000 (260,000) 2013 3,100,000 (900,000) In 2010 there is also a $230,000 opening balance in Accumulated OCI for unrecognized gains. The average remaining service life per employee in 2010, 2011 & 2012 is 20 years each and in 2013 it is 10 years. The net gain or loss that occurred during each year is as follows: Year Gain (Loss) 2010 $(550,000) 2011 (40,000) 2012 (2,000) 2013 40,000 Required: Compute the net gain/loss that is amortized in each of the 4 years above. (20 points),could you have it ready for me today question 2b?
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