Intermediate Accounting II Chapter 18+

Intermediate - EXERCISE 18-7(25–30 minutes(a 1 Gross profit recognized in 2010 Contract price $1,200,000 Costs Costs to date $280,000 Estimated

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Unformatted text preview: EXERCISE 18-7 (25–30 minutes) (a) 1. Gross profit recognized in 2010: Contract price ............................................... $1,200,000 Costs: Costs to date ......................................... $280,000 Estimated additional costs ................... 520,000 800,000 Total estimated profit ................................... 400,000 Percentage completion to date ($280,000/$800,000) .................................. 35% Gross profit recognized in 2010 .................. $ 140,000 Gross profit recognized in 2011: Contract price ............................................... $1,200,000 Costs: Costs to date ......................................... $600,000 Estimated additional costs ................... 200,000 800,000 Total estimated profit ................................... 400,000 Percentage completion to date ($600,000/$800,000) .................................. 75% Total gross profit recognized ...................... 300,000 Less: Gross profit recognized in 2010 ....... 140,000 Gross profit recognized in 2011 .................. $ 160,000 EXERCISE 18-7 (Continued) 2. Construction in Process ($600,000 – $280,000) .... 320,000 Materials, Cash, Payables, etc. ..................... 320,000 Accounts Receivable ($500,000 – $150,000) ........ 350,000 Billings on Construction in Process ............. 350,000 Cash ($320,000 – $120,000) ................................... 200,000 Accounts Receivable ..................................... 200,000 Construction in Process ....................................... 160,000 Construction Expenses ......................................... 320,000 Revenues from Long-Term Contracts .......... 480,000* *$1,200,000 X [($600,000 – $280,000) ÷ $800,000] (b) Income Statement (2011)— Gross profit on long-term construction contract ......... $160,000 Balance Sheet (12/31/11)— Current assets: Receivables—construction in process .................. $180,000* Inventories—construction in process totaling $900,000** less billings of $500,000 ................... $400,000 * *$180,000 = $500,000 – $320,000 **Total cost to date $600,000 2010 Gross profit 140,000 2011 Gross profit 160,000 $900,000 EXERCISE 18-8 (15–20 minutes) (a) 2010— $640,000 X $2,200,000 = $880,000 $1,600,000 2011—$2,200,000 (contract price) minus $880,000 (revenue recognized in 2010) = $1,320,000 (revenue recognized in 2011). (b) All $2,200,000 of the contract price is recognized as revenue in 2011. (c) Using the percentage-of-completion method, the following entries would be made: Construction in Process ........................................ 640,000 Materials, Cash, Payables, etc. ...................... 640,000 Accounts Receivable ............................................. 420,000 Billings on Construction in Process ............. 420,000 Cash ........................................................................ 350,000 Accounts Receivable ...................................... 350,000 Construction in Process ........................................ Construction in Process ....
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This note was uploaded on 10/03/2010 for the course ACCT Acct taught by Professor Straus during the Spring '10 term at University of Maryland Eastern Shore.

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Intermediate - EXERCISE 18-7(25–30 minutes(a 1 Gross profit recognized in 2010 Contract price $1,200,000 Costs Costs to date $280,000 Estimated

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