Raytheon Company’s 2018 Form 10-K states that sales to the

Raytheon Company’s 2018 Form 10-K states that sales to the U.S. government comprise 68% of its 2018 total net sales and sales to foreign governments through the U.S. government comprise 13% of its 2018 total net sales.

Required:

1. Why does the SEC require companies like Raytheon Company to alert financial statement readers to the existence of major customers?

2. How might this information be of use to a financial analyst?

3. Why might these substantial customers want to monitor the financial performance and health of Raytheon? What specific information about Raytheon would be of most interest to the customers?

4. Why might Raytheon want to monitor the financial health and policies of these customers? What information about the customers would be of most interest to Raytheon?

The following condensed statement of income of Helen Corporation, a

The following condensed statement of income of Helen Corporation, a diversified company, is presented for the two years ended December 31, 20X1 and 20X0:

On January 1, 20X1, Helen entered into an agreement to sell for $3,200,000 the assets and  product line of one of its separate operating divisions. The sale was consummated on December  31, 20X1, and resulted in a pre-tax gain on disposition of $900,000. This division’s contribution to Helen’s reported income before taxes for each year was as follows:

20X1 ………………… $640,000 loss

20X0 ………………… $500,000 loss

Assume an income tax rate of 21%.

Required:

1. In preparing a revised comparative statement of income, Helen should report income from continuing operations after income taxes for 20X1 and 20X0, respectively, of how much?

2. Starting with the revised income from continuing operations numbers you obtained in requirement 1, prepare the revised comparative income statements for 20X1 and 20X0 showing appropriate details for gain (loss) from discontinued operations.

Munnster Corporation’s income statements for the years ended December 31,

Munnster Corporation’s income statements for the years ended December 31, 20X2 and 20X1, included the following information before adjustments:

On January 1, 20X2, Munnster Corporation agreed to sell the assets and product line of one of its operating divisions for $2,000,000. The sale was consummated on December 31, 20X2, and it resulted in a pre-tax gain on disposition of $350,000. This division’s pre-tax net losses were $505,000 in 20X2 and $170,000 in 20X1. The income tax rate for both years was 21%.

Required:

Starting with operating income (before tax), prepare revised comparative income statements for 20X2 and 20X1 showing appropriate details for gain (loss) from discontinued operations.

Krewatch, Inc., is a vertically integrated manufacturer and retailer of

Krewatch, Inc., is a vertically integrated manufacturer and retailer of golf clubs and accessories (gloves, shoes, bags, etc.). Krewatch maintains separate financial reporting systems for each of its facilities. The company experienced the following events in 20X1:

1. After several years of production problems at the accessories manufacturing plant, Krewatch sold the plant to an investor group headed by a former manager at the plant.

2. Krewatch incurred restructuring costs of $12,562,990 when it eliminated a layer of middle management.

3. Krewatch extinguished $200 million in 30-year bonds issued 18 years ago. Krewatch recognized a gain on this transaction.

4. The company wrote off inventory that was not salable.

5. Equipment was sold at a loss.

Required:

For each event, (a) specify the appropriate reporting treatment (consider each event to be material) and (b) indicate whether it would be included in income from continuing operations or it would appear on the income statement below that subtotal.

For 20X1, Silvertip Construction, Inc., reported income from continuing operations

For 20X1, Silvertip Construction, Inc., reported income from continuing operations (after tax) of $1,650,000. On November 15, 20X1, the company adopted a plan to dispose of a component of the business. This component qualifies for discontinued operations treatment. During 20X1, the component had pre-tax operating losses of $95,000. The component’s assets had a book value of $760,000 on December 31, 20X1. A recent market value analysis of these assets placed their estimated selling price at $735,000, less a 6% brokerage commission. Management appropriately determines that these assets are impaired and expects to find a buyer for the component and complete the sale early in 20X2.

Required:

Prepare a partial income statement for Silvertip including EPS disclosures for the year ended December 31, 20X1. Begin at income from continuing operations. Assume a 21% income tax rate and 1,000,000 shares of outstanding common stock.

Bob’s Chocolate Chips and More, a bakery specializing in gourmet

Bob’s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business October 1, 20X1. The following transactions occurred during the month of October.

a. Common stock of $90,000 was sold at par to start the business.

b. Equipment consisting of mixers and ovens was acquired October 1 for $30,000 cash. The equipment is expected to last five years, after which it is expected to be sold for $5,000. Management uses the straight-line method to calculate depreciation expense.

c. Ingredients costing $15,000 were purchased on account during the month and all but $5,000 was paid for by the end of the month.

d. Rent is $500 a month. October, November, and December’s rent was paid October 5.

e. A payment of $800 for utilities was made during the month.

f. Sixty percent of the ingredients purchased in part c were prepared and sold for $35,000 on account; $26,000 was collected on accounts receivable during the month.

g. Wages of $5,200 were paid during the month. Moreover, wages for the last three days of the month amounted to $400 and will be paid during the first week of November.

h. Borrowed $12,000 from the bank for additional working capital requirements, and $3,000 was repaid by month-end. Interest on the unpaid loan balance amounted to $450 at the end of October and was paid on November 5.

Required:

Prepare the required journal entries and adjusting entries as well as an October income statement and a balance sheet as of October 31, 20X1, for Bob’s Chocolate Chips and More. You may want to consider using T-accounts to classify and accumulate the preceding transactions before preparing the statements.

On September 1, 20X1, Revsine Co. approved a plan to

On September 1, 20X1, Revsine Co. approved a plan to dispose of a segment of its business. Revsine expected that the sale would occur on March 31, 20X2, at an estimated pre tax gain of $375,000. The segment had actual and estimated pre-tax operating profits (losses) as follows:

Realized loss from 1/1/20X1 to 8/31/20X1 ………………….. $(300,000)

Realized loss from 9/1/20X1 to 12/31/20X1 ………………….. (200,000)

Expected profit from 1/1/20X2 to 3/31/20X2 ………………….. 400,000

The expected profit from 1/1/20X2 to 3/31/20X2 was based on Revsine’s expectations as of 12/31/20X1. Assume the marginal tax rate is 21%.

Required:

In its 20X1 income statement, what should Revsine report as profit or loss from discontinued operations (net of tax effects)?

Presented below is a combined single-step income and retained earnings

Presented below is a combined single-step income and retained earnings statement for Hardrock Mining Co. for 20X1.

Statement of Income and Retained Earnings for the Year Ended December 31, 20X1

($ in 000)

Net sales

$5,281,954

Costs and expenses

Cost of products sold

4,765,505

Marketing, administrative, and other expenses

193,147

Interest expense

17,143

Other, net

54,529

Total expenses before taxes

5,030,324

Earnings before income taxes

251,630

Provision for income taxes

(52,842)

Net income

198,788

Retained earnings at 1/1/20X1

3,046,660

Dividends on common stock

(100,000)

Retained earnings at 12/31/20X1

$3,145,448

Additional facts gleaned from notes to Hardrock’s financial statements follow (dollar amounts in thousands):

a. Other, net for 20X1 included a corporate restructuring charge of $8,777 and a pre-tax profit of $12,000 on discontinued operations. The remainder of the category is composed of investment losses.

b. Marketing, administrative, and other expenses for 20X1 included a loss on currency translation of $55.

c. All of these transactions were subject to Hardrock’s income tax rate of 21%.

d. Hardrock disclosed earnings per share data only in the notes to the financial statements. The company had 10,000,000 shares of common stock outstanding throughout 20X1.

Required:

Recast this single-step combined income statement and retained earnings statement as a multiple-step income statement in appropriate form. Include appropriate per share amounts.

1. Lyft has identified the drivers, not the riders, as

1. Lyft has identified the drivers, not the riders, as its customers.

a. What arguments support the company’s assessment?

b. What arguments suggest Lyft’s customer is actually the rider?

2. What is/are the performance obligation(s) Lyft fulfills when a typical ride is completed?

3. If the rider were deemed to be the customer, what would be the performance obligation(s) fulfilled when a typical ride is completed?

4. How would Lyft’s income statement be different if it treated the rider as its customer?

Lyft, Inc., is an app-based ridesharing service. Users request rides via their smartphones and drivers, using their own cars, respond to the requests via the system. Lyft collects the fares from riders and remits the payments due to drivers, keeping a fee for itself. Lyft treats drivers as independent contractors, not employees. Drivers may work as much or a little as they like, and set their own hours. Lyft sets fares charged to riders.

In 2019, Lyft made an initial public offering (IPO) and, as part of the process, filed a registration statement, called a Form S-1, with the SEC. In the financial statements included in the Form S-1, Lyft reported revenues of $2.16 billion in 2018, up from $1.06 billion in 2017. Its net loss in 2018 was $911 million versus a net loss of $688 million in 2017.

In the notes to the financial statements, Lyft described its revenue recognition policies as follows:

Revenue Recognition

Ridesharing Marketplace

We recognize revenue from fees paid by drivers for use of our Lyft platform offerings using the five-step revenue recognition model described in Note 2 of the notes to our consolidated financial statements, in accordance with ASC 606. Drivers enter into terms of service, or ToS, with us in order to use our Lyft Driver app.

We provide a service to drivers to complete a successful transportation service for riders. This service includes on-demand lead generation that assists drivers to find, receive and fulfill on-demand requests from riders seeking transportation services and related collection activities using our Lyft platform. As a result, our single performance obligation in the transaction is to connect drivers with riders to facilitate the completion of a successful transportation service for riders. We evaluate the presentation of revenue on a gross versus net basis based on whether we act as a principal by controlling the transportation service provided to the rider or whether we act as an agent by arranging for third parties to provide the service to the rider. We facilitate the provision of a transportation service by a driver to a rider (the driver’s customer) in order for the driver to fulfill their contractual promise to the rider. The driver fulfills their promise to provide a transportation service to their customer through use of the Lyft platform. While we facilitate setting the price for transportation services, the drivers and riders have the discretion in accepting the transaction price through the platform. We do not control the transportation services being provided to the rider nor do we have inventory risk related to the transportation services. As a result, we act as an agent in facilitating the ability for a driver to provide a transportation service to a rider.

We report revenue on a net basis, reflecting the service fees and commissions owed to us from the drivers as revenue, and not the gross amount collected from the rider. We made this determination of not being primarily responsible for the services since we do not promise the transportation services, do not contract with drivers to provide transportation services on our behalf, do not control whether the driver accepts or declines the transportation request via the Lyft platform, and do not control the provision of transportation services by drivers to riders at any point in time either before, during, or after, the trip.

We consider the ToS and our customary business practices in identifying the contracts under ASC 606. As our customary business practice, a contract exists between the driver and us when the driver’s ability to cancel the trip lapses, which typically is upon pickup of the rider. We collect the fare and related charges from riders on behalf of drivers using the rider’s pre-authorized credit card and retain any fees owed to us before making the remaining disbursement to drivers; thus the driver’s ability and intent to pay is not subject to significant judgment.

We earn service fees and commissions from the drivers either as the difference between an amount paid by a rider based on an upfront quoted fare and the amount earned by a driver based on actual time and distance for the trip or as a fixed percentage of the fare charged to the rider. In an up-front quoted fare arrangement, as we do not control the driver’s actions at any point in the transaction to limit the time and distance for the trip, we take on risks related to the driver’s actions which may not be fully mitigated. We earn a variable amount from the drivers and may record a loss from a transaction, which is recorded as a reduction to revenue, in instances where an up-front quoted fare offered to a rider is less than the amount we are committed to pay the driver.

We recognize revenue upon completion of a ride as the single performance obligation is satisfied and we have the right to receive payment for the services rendered upon the completion of the ride.

We offer various incentive programs to drivers that are recorded as reduction to revenue if we do not receive a distinct good or service in consideration or if we cannot reasonably estimate the fair value of goods or services received.

The following information is provided for Kelly Plumbing Supply.Cash received

The following information is provided for Kelly Plumbing Supply.

Cash received from customers during December 20X1 ………….. $387,000
Cash paid to suppliers for inventory during December 20X1 ……. 131,000

Cash received from customers includes all $139,000 of the accounts receivable that were outstanding at November 30, 20X1. Accounts receivable at December 31, 20X1, totaled $141,000.

Accounts payable (to suppliers of inventory) decreased by $19,000 from November 30, 20X1, to December 31, 20X1. The balance in the inventory account decreased by $39,000 over the same period.

Required:

What is gross profit for the month of December under accrual accounting?