{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PRactice Final Solution

PRactice Final Solution - Accounting 381(SOLUTION Practice...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Accounting 381 (SOLUTION) Practice Final Professor Kathy Rupley Name _____________________________________ Section ____________________________________ General Instructions : 1. Please observe the PSU Code of Conduct. 2. This exam packet should have 17 pages . Please confirm that you have all the pages. 3. Present Value Tables are provided for you on page 17. 4. Review the complete exam in order to allocate your time appropriately. 5. In fairness to all students, questions will not be answered during the exam, except to explain words or phrases. If a question is ambiguous, write your assumptions on the exam along with your answer. You will receive credit provided your assumptions are necessary and reasonable . 6. Write your answers neatly in the space provided. 7. Monitor your time and good luck! Points Available Points Received Question I 27 Question II 28 Question III 45 Question IV 25 TOTAL 125 1
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Question I: Revenue 1. ( 17 points ) Salerno Construction, Inc. has consistently used the percentage-of-completion method to recognize revenue on its long-term construction contracts. During 2004, Salerno started work on a $1,200,000 construction contract, which it plans to complete in 2006. The following information was taken from Salerno’s accounting records: 2004 2005 Cumulative costs incurred as of year-end 204,000 812,500 Estimated costs to complete at year-end 816,000 437,500 Total estimated costs at year-end 1,020,000 1,250,000 Progress billings during year 400,000 400,000 Collections during year 300,000 500,000 a. What amount of revenue, expense, and gross profit should Salerno have recognized on this contract for the year ended 12/31/04? 2004 Revenue: ___________240,000______________ 2 pts 2004 Expense: ___________204,000_______________ 2 pts 2004 Gross Profit: __________36,000_______________ 2 pts b. Prepare the December 31, 2004 balance sheet disclosure of construction in process and related billings. Be sure to indicate whether the amount is an asset or a liability. Billings in excess of CIP (1/2 pt for title) (400K – 240K) = 160,000 (1 1/2 pt. for amount) 2
Image of page 2
Question I, continued c. Calculate the amount of revenue, expense, and gross profit that Salerno will report in 2005. 2005 Revenue: __________540,000_______________ 2 pts 2005 Expense: __________626,000_______________ 2 pts 2005 Gross Profit: __________(86,000)_______________ 2 pts d. What would be the effect on income (if any) for 2005 if Salerno used the Completed Contract Method to account for its long-term construction contracts instead of the Percent Completion Method? If Salerno used the Completed Contract Method, they would not report any revenue in 2005 but they would report a loss on the contract of $50,000 because there is an overall contract loss. Since they reported expenses greater than revenues (86,000 – 50,000 for overall contract loss and 36,000 for previously recognized gross profit) under the percentage completion method, net income would be higher if they used the completed contract method (this method only reports expenses greater than revenue of 50,000.). 3 pts Completed contract % completion Net loss 2005 -50,000 -86,000 3
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Question I, continued 2. (10 points) Riccolo, Inc. makes all sales on installment. The following information is provided for Riccolo, Inc. in 2007: Inventory on hand at end of year $ 120,000 Inventory on hand, beginning of year $ 325,000 Installment sales in 2007 $1,000,000 2007 Collections on 2007 installment sales $ 580,000 2007 Purchases $ 300,000 Instructions i)
Image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern