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Hinson 4-1 Revenue Recognition Discussion

Hinson 4-1 Revenue Recognition Discussion - Intermediate...

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Intermediate Accounting I Assignment 4-1 Revenue Recognition Discussion Jamie Hinson January 23, 2008 Exercise 5-7 1. Percentage of Completion Method 2006 2007 Contract price $2,000,000 $2,000,000 Actual costs to date 300,000 1,575,000 Estimated costs to complete 1,200,000 0________ Total project cost 1,500,000 1,575,000_ Total gross profit $500,000 $425,000 Percentage of completion (actual costs to date 20% 100% Divided by estimated total project cost) Total project gross profit 500,000 425,000 Multiplied by the estimated % of completion X 20% X 100%_ Gross profit earned to date $100,000 $425,000 Less gross profit recognized in previous periods 0 (100,000)_ Gross profit recognized currently $100,000 $325,000 2. Percentage of Completion Completed Contract Gross profit recognized 2006 $100,000 $0 2007 325,000 425,000 Total gross profit $425,000 $425,000
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Exercise 5-15 1. B. The Installment Method – which recognizes the gross profit by applying the gross profit percentage on the sale to the amount of cash actually received. 2. 900,000 X 60% = 540,000 900,000 – 540,000 = 360,000 A. $360,000 3. Percentage of Completion Completed Contract Gross profit/loss recognized Project 1 $40,200 $0 Project 2 (57,800)
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