SSNT5_Income+Msmt2 - Income Measurement and Profitability...

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Income Measurement and Profitability Analysis
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On July 1, 2009, Shuster Co sold inventory to Capone Corp for $300,000. Terms of the sale called for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July 1, 2010. The inventory cost Shuster $120,000. The company uses the perpetual inventory system. 1) Prepare the journal entries for 2009 and 2010 using point of delivery revenue recognition. 2) Repeat requirement 1 applying the installment sales method. 3) Repeat requirement 1 applying the cost recovery method.
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Point of delivery July 1, 2009 To record installment sale To record cash collection from installment sale July 1, 2010 To record cash collection from installment sale
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Installment method July 1, 2009 To record installment sale To record cash collection from installment sale To recognize gross profit from installment sale
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Installment method July 1, 2010 To record cash collection from installment sale To recognize gross profit from installment sale
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Cost recovery July 1, 2009 To record installment sale To record cash collection from installment sale July 1, 2010 To record cash collection from installment sale To recognize gross profit from installment sale
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On June 15, 2009, Kemmerer Construction entered into a long-term construction contract to build a baseball stadium in Gainesville for $220 million. The expected completion date is April 1 of 2011. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): 2009 2010 2011 Costs incurred during the year $40 $80 $50 Estimated costs to complete as of 12/31 120 60 -
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Determine gross profit/loss to be recognized in each of the 3 years using percentage of completion 2009: 40/160 = 25% * 60 = $15 2010: 120/180 = 66.67% * 40 = 26.67 – 15 = $11.67 2011: 220-170 = 50 – (15 + 11.67) = $23.33 2009 2010 2011 Contract price $220 $220 $220 Actual costs to date 40 120 170 Estimated costs to complete 120 60 0 Total estimated costs 160 180 170 Estimated gross profit (actual in 2011) $60 $40 $50
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How much revenue will Kemmerer report in its 2009 and 2010 income statement related to this contract using the percentage-of-completion method?
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Determine the amount of gross profit or loss to be recognized in each of the three years using the
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This note was uploaded on 07/08/2011 for the course ACG 3482C taught by Professor Tinaker during the Fall '09 term at University of Florida.

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SSNT5_Income+Msmt2 - Income Measurement and Profitability...

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