# Brovo Construction Company uses the percentage-of-completion method of accounting. In 2015, Brovo began work under a contract with a contract price of \$1,500,000. Other details follow Journal Entry, Accounting Homework Help

Question 3: 15% points:

Brovo Construction Company uses the percentage-of-completion method of accounting. In 2015, Brovo began work under a contract with a contract price of \$1,500,000. Other details follow:

 Common Stock \$800,000 Additional Paid in Capital 1,600,000 Retained Earnings 1,845,000
 2015 2016 Cost incurred during the year \$980,000 \$1,375,000 Estimated Cost to complete, as of December 31 420,000 0
 Billings to date 800,000 1,500,000 Collections to date 250,000 1,500,000

Prepare all required general journal entries for 2015. (Use 12/31/15 as transaction dates.)

Question 4: 20% points:

Warren Buffet, an investor in Alpha Co., asked you for advice on the propriety of Alpha’s financial reporting for two of its investments. Assume that Alpha does not elect the fair value option for reporting its financial assets and liabilities. You obtained the following information related to the investments from Alpha’s December 31, 2015 financial statements:

> 20% ownership interest in Beta Co., represented by 200,000 shares of outstanding common stock purchased on January 2, 2015, for \$600,000. > 20% ownership interest in Charlie Co., represented by 20,000 shares of outstanding common stock purchased on January 2, 2015, for \$300,000. > On January 2, 2015, the carrying values of the acquired shares of both investments equaled their purchase price.

> Beta reported earnings of \$400,000 for the year ended December 31, 2015, and declared and paid dividends of \$100,000 on 12/15/2015.
> Charlie reported earnings of \$350,000 for the year ended December 31, 2015, and declared and paid dividends of \$60,000 on 12/15/2015.
> On December 31, 2015, Beta’s and Charlie’s common stock were trading over-the-counter at \$18 and \$20 per share, respectively.
> The investment in Charlie is accounted for using the equity method.
> The investment in Beta is accounted for as available-for-sale securities.

You recalculated the amounts reported in Alpha’s December 31, 2015 financial statements, and determined that they were correct. Stressing that the information available in the financial statements was limited, you advised Warren that, assuming Alpha properly applied generally accepted accounting principles, Alpha may have appropriately used two different methods to account for its investments in Beta and Charlie, even though the investments represent equal ownership interests.

Prepare the general journal entries for the following:
1. Alpha’s investment in Charlie Co. on January 2, 2015.
2. Dividends received from Charlie in 2015.
3. Required for Charlie’s reported income for the year ending on December 31, 2015.
4. Alpha’s investment in Beta Co. on January 2, 2015.
5. Dividends received from Beta in 2015.
6. Required for Beta’s reported income for the year ending on December 31, 2015

Question 5: 30% points:

The following is a condensed trial balance of Bravo Co., a publicly held company, after adjustments for income tax expense.

 Bravo Co. Condensed Trial Balance Accounts 12/31/2015 Balances Dr. (Cr .) 12/31/2014 Balances Dr. (Cr.) Cash \$484,000 \$817,000 Accounts receivable, net 670,000 610,000 Property, plant, and equipment 1,070,000 995,000 Accumulated depreciation (345,000) (280,000) Dividends payable (25,000) (10,000) Income taxes payable (60,000) (150,000) Deferred income tax liability (63,000) (42,000) Bonds payable (500,000) (1,000,000) Unamortized premium on bonds (71,000) (150,000) Common stock (350,000) (150,000) Additional paid-in capital (430,000) (375,000) Retained earnings (185,000) (265,000) Sales (2,420,000) Cost of sales 1,863,000 Selling and administrative expenses 220,000 Interest income (14,000) Interest expense 46,000 Depreciation 88,000 Loss on sale of equipment 7,000 Gain on extinguishment of bonds (90,000) Income tax expense 105,000 _________ T otals \$0 \$0