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Significant influence over an investee may be indicated by material intercompany transactions and interchange
of managerial personnel

If the estimated cost at the beginning of project quite accurate, the amount of revenue being recognized in the
first year of project, will be the same for both percentage of completion and cost recovery method

When a company changes an accounting principle, it should report the change by reporting the cumulative effect
of the change in the current years income statement


1. Company X realised that they have a material error, due to excluded some inventory when they held the
inventory stock opname last year.
Instructions : How company should account for this, in accordance with PSAK 25 ?

2. Travel agent Blue Sky, sells airline ticket and receive 7 % commission. In its income statement, the company
has reported all the sales as its revenue.
Instructions : Do you agree with this accounting treatment ? Please give your argument or explanation.

3. Widjaja Company is using the percentage-of-completion method for its long term contract . It is a 4-year
contract that is currently in its second year. The latest estimates of total contract costs indicate that the
contract will be completed at a profit to Widjaja Company.
(a) What theoretical justification is there for Widjaja Companys use of the percentage-of-completion

(b) What would be the effect on earnings per share in the second year of the 4-year contract of using the
percentage-of-completion method instead of the completed-contract method? Discuss.


Question 1

Pie Co. at the end of 2015, its first year of operations, prepared a reconciliation between pretax financial income
and taxable income as follows:

Pretax financial income $ 240,000

Extra depreciation taken for tax purposes (420,000)
Estimated expenses deductible for taxes when paid 480,000
Taxable income $ 300,000

Use of the depreciable assets will result in taxable amounts of $140,000 in each of the next three years. The
estimated litigation expenses of $480,000 will be deductible in 2018 when settlement is expected.

(a) Prepare a schedule of future taxable and deductible amounts.
(b) Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2015,
assuming a tax rate of 30% for all years.
(c) Prepare the tax presentation in Pie Cos income statement for 2015
Question 2

Morlan Corporation is preparing its December 31, 2015, financial statements. Two events that occurred between
December 31, 2015, and March 10, 2016, when the statements were issued, are described below.
1. A liability, estimated at $160,000 at December 31, 2015, was settled on February 26, 2016, at $170,000.
2. A flood loss of $80,000 occurred on March 1, 2016
Instructions :
What effect do these subsequent events have on 2012 net income?

Question 3
Victoria Company has the following investment:
On January 1, 2010, purchased 12% William bonds, having a maturity value of $500,000, for $537,907.40. The bonds
provide the bondholders with a 10% yield. They are dated January 1, 2010, and due January 1, 2015, with interest
receivable December 31 of each year. Victoria Company uses the effective-interest method to allocate unamortized
discount or premium.

On February 1, 2010 acquired 15% of the outstanding ordinary shares of Sharapova Company for $37,400

(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that Victoria has an
active trading strategy for these investment

(b) Prepare the entry to record interest received and the amortization for 2010

(c) The fair values of the investments on December 31,2010 were:

William Bonds $534,200
Sharapova Company shares $31,800

What entry or entries, if any, would you recommend be made? Show the portfolio schedule

(d) The William bonds were sold on July 31, 2011 for $600,000 plus accrued interest.
Give the proper entry (show all calculation)

Question 4
On January 2011 Sky Corporation signed a contract to build a building with Shopping corporation. The construction
started immediately after the the signing and completed at the end of 2013. Information related with the project for
2011 up to 2012 is provided in the table bellow.
2011 2012
Contract price 2,000,000 2,000,000
Cost current year 400,000 750,000
Est cost to complet
in future years 1,200,000 1,150,000
Billing to customer
current year 300,000 1,100,000
Cash receipt from
customer current
year 200,000 1,000,000


(a) Prepare all journal entries should be made by Sky CO to record the transaction in 2011, and 2012,
along with the calculation

(b) Determine the balance of Sky Cos Account Receivable for every end of the year related with this