AC302-01_Unit 4_Assignment_Marjorie Bowden

AC302-01_Unit - E18-1 Revenue Recognition Alternatives The Smith Construction Company received a contract on to build a warehouse over a period of

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The Smith Construction Company received a contract on September 30, 2010 to build a warehouse over a period of 18 months. The contract price was $600,000 and the estimated cost to build was $400,000. The actual (and estimated) costs incurred and the payments made by the purchaser are as follows: Costs Payments September 30–December 31, 2010 $120,000 $90,000 January 1–December 31, 2011 240,000 210,000 January 1–March 31, 2012 40,000 300,000 Required 1. Compute the amount of revenue, expense, and gross profit each year for each of the following a. Revenue recognition at the time of sale (completion) b. Revenue recognition during production c. Revenue recognition at the time of cash receipt d. Cost recovery (compute only the gross profit) 2. Which method provides the most useful information to users? Under what circumstances would the other methods provide more useful information? E18-1 Revenue Recognition Alternatives methods (enter zero where necessary) :
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Name: An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions. Required 1. Compute the amount of revenue, expense, and gross profit each year for each of the following a. Revenue recognition at the time of sale (completion) Revenue Expense Gross Profit 2010 $- $- $- 2011 - - - 2012 600,000 400,000 200,000 b. Revenue recognition during production Revenue Expense Gross Profit 2010 $180,000 $120,000 $60,000 2011 360,000 240,000 120,000 2012 60,000 40,000 20,000 c. Revenue recognition at the time of cash receipt Revenue Expense Gross Profit 2010 $90,000 $60,000 $30,000 2011 210,000 140,000 70,000 2012 300,000 200,000 100,000 d. Cost recovery (compute only the gross profit) Gross Profit 2010 $- 2011 - 2012 200,000 2. Which method provides the most useful information to users? Under what circumstances would the other methods provide more useful information? Complete the paragraph above by selecting the word, number, or phrase that best fits the corresponding number (you may use an answer more than once). (1) long-term (2) revenue (3) estimates (4) enforceable (5) obligations (6) measure (7) income (8) valued (9) selling (10) construction (11) revenue (12) completed (13) contract (14) significant (15) uncertainty (16) collection (17) significant (18) uncertainty (19) collectability (20) cash E18-1 Revenue Recognition Alternatives methods (enter zero where necessary) : In the situation of a (1) construction contract, recognition of (2) during production is generally the most useful, if the criteria discussed in the chapter are met (reasonably dependable (3) can be made, the contract specifies the (4) rights, and the buyer and seller can be expected to satisfy their (5) ). The method produces a better (6) of the (7) -producing activities of the company each period and an asset (8) at the (9) price of the portion of the
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This note was uploaded on 05/30/2011 for the course ACCOUNTING 300 taught by Professor Ksnow during the Spring '09 term at Kaplan University.

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AC302-01_Unit - E18-1 Revenue Recognition Alternatives The Smith Construction Company received a contract on to build a warehouse over a period of

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