Name: __________________________ Date: _____________

Chapters 17-19 Spring 2010 Acct 3312

1.Trading equity securities.
Korman Company has the following securities in its portfolio of trading equity securities on
December 31, 2010:
Cost
Fair Value
5,000 shares of Thomas Corp., Common
$150,000
$149,000
10,000 shares of Gant, Common
172,000
185,000
$322,000
$334,000
All of the securities had been purchased in 2010. In 2011, Korman completed the following
securities transactions:
March 1 Sold 5,000 shares of Thomas Corp., Common @ $29 less fees of $500.
April 1 Bought 600 shares of Werth Stores, Common @ $48 plus fees of $150.
The Korman Company portfolio of trading equity securities appeared as follows on December
31, 2011:
Cost
Fair Value
10,000 shares of Gant, Common
$172,000
$195,500
600 shares of Werth Stores, Common
28,950
25,500
$200,950
$221,000
Instructions
Prepare the general journal entries for Korman Company for:
(a) the 2010 adjusting entry.
(b) the sale of the Thomas Corp. stock.
(c) the purchase of the Werth Stores' stock.
(d) the 2011 adjusting entry.
2.Percentage-of-completion and completed-contract methods.
On February 1, 2010, Marsh Contractors agreed to construct a building at a contract price of
$5,500,000. Marsh estimated total construction costs would be $4,000,000 and the project
would be finished in 2012. Information relating to the costs and billings for this contract is as
follows:
2010
$1,800,000
2,200,000
2,200,000
2,000,000

2011
$2,700,000
1,760,000
4,000,000
3,500,000

2012
$4,500,000
-05,600,000
5,500,000

Total costs incurred to date

Estimated costs to complete
Customer billings to date
Collections to date
Instructions
Prepare journal entries to recognize revenue and expense using the percentage of completion
method for the three years that the project was being worked on.

date
2010

2011

2012

Account names
Debit
Expenses
1800000
CIP
675000
Revenues
=(1800/4000)*5500000
Expenses
900000
CIP
Revenues
=(2700/4460)*5500000)2475000
Expenses
1800000
CIP
370403.59
Revenues
=(4500/4500)*55000002475000-854596.41

Credit
2475000

45403.59
854596.41

2170403.59

3.Differences between accounting and taxable income and

the effect on deferred taxes.
The following differences enter into the reconciliation
of financial income and taxable income of Abbott
Company for the year ended December 31, 2010, its
first year of operations. The enacted income tax rate is
30% for 2010, 35% for 2011 and 40% for years after
2011.

Pretax accounting income (GAAP)

Excess tax depreciation
Litigation accrual
Unearned rent revenue deferred on the books but approp
recognized in taxable income
Interest income from New York municipal bonds
(IRS) Taxable income
1.
2.
3.
4.

Excess tax depreciation will reverse equally over a f

It is estimated that the litigation liability will be paid
Rent revenue will be recognized during the last year
Interest revenue from the New York bonds is expecte
at the end of 2014.
Instructions
(a)
(b)
(c)

Prepare a schedule of future taxable and (deductib

Prepare a schedule of the deferred tax (asset) and l
Prepare the journal entry to record income tax exp
2010.