Use following info for Middle company:

VII. Use following info for Middle company:

- sales account included an $800,000 (net of tax) loss due to flood destroying a facility, never happened before.

- the account gain/loss from sale of investment included the selling of a small division (a segment of Giant) for $4 million. prior to sale the division had generated income of $1 million.

Income from operating activities is $1.6 million and tax rate is 40%. how do you treat these two events in balance sheet or income statement. show calculation.

VIII. Consider following for a construction contract.

The construction begun at Jan 1 2010. Contract price: $18,000,000.

Cost for 2010: 3.2 million, cost for 2011: 5,760,000, cost for 2012: 3,840,000 (these costs are discrete)

Estimated costs to complete as of the end of 2010 is 10,800,000 , estimated cost to complete as of the end of 2011 is $4,000,000.

Billing to company in 2010 was 3,000,000 for 2011 was $5,000,000 with the remaining billing during 2012

Requirement:

Prepare a schedule showing the effect on the income statement and balance sheet under the percentage -of- completion vs. the completed contract method. Prepare the entries that would have been made for each of three years under both methods.