Sale of securities held as a part of its portfolio

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3. Sale of securities held as a part of its portfolio resulted in a loss of $57,000 (pretax). 4. When its president died, the corporation realized $110,000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $46,000 (the gain is nontaxable). 5. The corporation disposed of its recreational division at a loss of $115,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. 6. The corporation decided to change its method of inventory pricing from average cost to the FIFO method. The effect of this change on prior years is to increase 2005 income by $60,000 and decrease 2006 income by $20,000 Solutions before taxes: 1). $110,000 - $46,000 = $64,000 5). $790,000 -$57,000 + $64,000 + $1,500 = $798,500 2). $734,500 x 30% = $220,350
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P18-7a At At At 12/31/2007 12/31/2008 12/31/2009 Contract costs incurred to date $150,000.00 $1,200,000.00 $2,100,000.00 Estimated costs to complete the contract $1,350,000.00 $800,000.00 $- Billings to Mingxia $300,000.00 $1,100,000.00 $1,850,000.00 Percentage Complete 2007 2008 2009 Contract Price $1,950,000.00 $1,950,000.00 $1,950,000.00 Less Estimated Cost Costs to Date $150,000.00 $1,200,000.00 $2,100,000.00 Estimated Cost to Complete $1,350,000.00 $800,000.00 $- Estimated Total Costs $1,500,000.00 $2,000,000.00 $2,100,000.00 Estimated Total Gross Profit $450,000.00 $(50,000.00) $(150,000.00) Percent Complete 10% 60% 100% Journal Entries 2007 2008 2009 Construction in Process $150,000.00 $1,050,000.00 $900,000.00 Materials, Cash, Payables, etc. $150,000.00 $1,050,000.00 $900,000.00 Accounts Receivable $300,000.00 $1,100,000.00 $1,850,000.00 Billings on Construction in Process $300,000.00 $1,100,000.00 $1,850,000.00 Revenue and Gross Proft by Year 2007 2008 2009 Revenue Recognized in $195,000.00 $975,000.00 $780,000.00 Gross Profit Recognized in $45,000.00 $(75,000.00) $(120,000.00) Journal Entries 2007 2008 2009 Construction in Process (Gross Profit) $45,000.00 $(75,000.00) $(120,000.00) Construction Expense $150,000.00 $1,050,000.00 $900,000.00 Revenue from Long Term Contract $195,000.00 $975,000.00 $780,000.00 Billings on Construction in Process $3,250,000.00 Construction in Process $3,250,000.00 Loss on Unprofitable Contract 2007 2008 2009 Original Revised Revised Estimates Estimates Estimates Contract Price $1,950,000.00 $1,950,000.00 $1,950,000.00 Estimated Total Cost $1,350,000.00 $2,000,000.00 $2,100,000.00 Estimated Gross Profit $450,000.00 Estimated Loss $(50,000.00) $(150,000.00) Computation of Revenue Recognizable - Unprofitable Contract 2007 2008 2009 Contract Price $1,950,000.00 $1,950,000.00 $1,950,000.00
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