AC501: Financial Accounting and Confirming

Unit several Assignment

Part 7

E7-5 (Recognition of profit for long-Term Contracts)

Andre Agassi Construction Company began functions January 1, 2008. In the past year, Andre Agassi Construction created a contract with Lindsey Davenport Corp. to create a manufacturing facility. At that time, Agassi estimated that it would consider 5 years to complete the center at an overall total cost of money 4, 5000, 000. The entire contract selling price for building of the service is dollar 6, 300, 000. In the past year, Agassi received $ one particular, 185, 800 in constriction coast associated with the construction project. The approximated cost to complete the contract can be $ four, 204, two hundred. Lindsey Davenport Corp. was billed and paid 30% of the agreement price.

Guidelines

Prepare schedules to figure out the amount of gross profit being recognized intended for the year ended December 23, 2008, beneath each of the following methods. (a) Completed-contract approach.

(b) Percentage-of-completion method.

Display supporting calculations in good form.

Answer

Percentage-of-completion approach

Percentage of completion = (costs received to date/ estimated total costs) one particular, 185, 800/ 4, 204, 200 =28. 21%

Earnings to be known = six, 300, 000*. 2821=1, 777, 230

Expense to be recognized1, 185, 800

Gross profit591, 430

Billings on uncompleted contract more than related costs and recognized profit Receivables 1, 890, 000

Less: Construction price + gross profit

(1, 185, 800 + 591, 430)= 1, 777, 230

Excess of billings over costs 112, 770

Completed-contract approach

No major profit is recognized in completed contract method

Billings on uncompleted contract in excess of related costs and acknowledged profit Receivables1, 890, 500

Less: Construction expenses 1, 185, 800

Excess of billings over costs704, 200

E7-8 (Installment-Sales and Cost-Recovery Methods)

Kenny Harrison Corp., a capital goods manufacturing business that started upon January some, 2008, and operates over a calendar-year basis, uses the installment-sales approach to profit reputation in accounting for all its sales. The following data were taken from the 2008 and 2009 information.

2008

2009

Installment sales

$ 480, 000

$ 620, 500

Gross revenue as a percent of price

25%

28%

Cash selections on sales of 2008

$ a hundred and forty, 000

bucks 240, 1000

Cash selections on product sales of 2009

-0-

dollar 180, 000

The amounts given for cash series exclude sums collected pertaining to interest costs. Instructions

(a) Compute the number of realized major profit to become recognized around the 2009 salary statement, using the installment-sales technique. (b) Compute the amount of understood gross earnings to be acknowledged on the salary statement, making use of the cost-recovery technique.

Answer

(a)

Sale Yr

Gross Revenue

Percentage

2009

Collections

2009

Realized Income

2008

. 25/(1. 00 &. 25) sama dengan 20%

$ 240, 1000

$ 48, 000

2009

. 28/(1. 00 +. 28) = 21. 875%

180, 000

39, 375

Total

87, 375

(b)

The gross profit being a percentage of sales in 2008 can be 20% (as computed in (a) over; therefor the gross earnings is dollar 96, 000 (480, 000x 20%) therefore, the cost of 08 sales is 384, 500 (480, 000 – ninety six, 000). This is due to the amount that collected in 2008 (140, 000) and 2009 (240, 000) will not exceed the total cost of 384, 000, as a result no revenue is acknowledged in 2008 or 2009 on 2008 sales. Likewise there is no earnings recognized in 2009 revenue because the collection of 180, 1000 do not go beyond the total expense amount of 484, 375 (620, 000/1. 28).

Phase 8

E8-9 (Computing debt and Preparing Journal Entries)

The trial balance before adjusting of Reba McIntyre Inc. shows the subsequent balances.

Doctor

Cr.

Accounts Receivable

bucks 90, 500

Allowance to get Doubtful Accounts

1, 750

Sales (all on credit)

$ 680, 000

Guidelines

Prepare the entry pertaining to estimated money owed assuming that the allowance should be to provide for dubious accounts on the basis of: (a) 4% of gross accounts receivable and

(b) 1% of net sales.

Answer

(a)

Bad Debts...