KeyExam 2B 2010

KeyExam 2B 2010 - Key EXAM 2B Fall 2010 I REVENUE...

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Key EXAM 2B, Fall 2010 I. REVENUE RECOGNITION: LONG TERM CONSTRUCTION (25 Points) In 2009, Jackson's Construction Company, a calendar year company, entered into a contract to build an office building for $6,000,000. Construction began in 2009 and was completed in 2011. 2009 2010 2011 Cost incurred to date 1,140,000 3,290,000 4,410,000 Estimated costs to complete 2,660,000 1,410,000 0 Billings each year ` 1,.400,000 2,500,000 2,100,000 Cash collected during the year 1,300,000 2,400,000 2,300,000 Show all your work in the spaces provided below each answer. NO credit will be given for answers not supported by calculations. A. Percentage of Completion Method If Jackson uses the percentage-of-completion method to account for long term construction projects, calculate the Gross Profit and Revenue that would be recognized each year. 1. Gross Profit Calculations. (8 points) Gross Profit (2009) _____660,000_____ 1140 = 1140 = 30% .30 (6,000,000 – 3,800,000) = 660,000 1140+2,660 3800 Gross Profit (2010) _____250,000______ 2009 % 3290 = 3290 = 70% (6,000,000-4,700,000) = 910,000 3290+1410 4700 GP recognized in 2009 660,000 GP recognized in 2010 250,000 2. Revenue Recognition (8 Points) Revenue (2009) _____1,800,000 ____ 30% (6,000,000) = 1,80,000 Revenue (2010) _________________ 70% (6,000,000) = 4,200,000 Revenue recognized in 2009 1,800,000 Revenue recognized in 2010 2,400,000 1
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3 . Balance Sheet End of 2010 (4 points) Show your calculations Account and amount reported on the balance sheet at the end of 2010 Construction in Process @ end of 2010 1140 + 660 = 1800 End of 2009 1800+ 2150+ 250 = 4200 End of 2010 Billings 1400 + 2500 = 3900 End of 2010 (cumulative billings) 4200 – 3900 = 300 Account title Amount Asset or Liability Construction in process in excess of billings 300,000 Asset __________________________________ _______ ______________ B . Completed Contract Method (5 Points) Assume Jackson uses the completed contract method to account for long term construction projects and prepare the journal entry that would be needed on completion of the contract in 2011 Construction in Process Gross Profit 1,590,000 Construction in Process, Cost 4,410,000 Revenue 6000,000 . 2
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This note was uploaded on 03/12/2011 for the course ACCT 3110 taught by Professor Cutler during the Spring '08 term at North Texas.

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KeyExam 2B 2010 - Key EXAM 2B Fall 2010 I REVENUE...

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