Chapter 18 Solutions

Chapter 18 Solutions - dCHAPTER 18 SOLUTIONS TO BRIEF...

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dCHAPTER 18 SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 18-1 (a) Sales Returns and Allowances 78,000 Accounts Receivable 78,000 (b) Sales Returns and Allowances 27,000 Allowance for Estimated Sales Returns and Allowances 27,000 [(15% X $700,000) – $78,000] BRIEF EXERCISE 18-2 Construction in Process 1,700,000 Materials, Cash, Payables, etc. 1,700,000 Accounts Receivable 1,200,000 Billings on Construction in Process 1,200,000 Cash 960,000 Accounts Receivable 960,000 Construction in Process 680,000 [($1,700,000 ÷ 5,000,000) X $2,000,000] Construction Expenses 1,700,000 Revenue from Long-Term Contracts 2,380,000 ($7,000,000,000 X 34%)
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BRIEF EXERCISE 18-3 Current Assets Accounts Receivable $ 240,000 Inventories Construction in process $2,450,000 Less: Billings 1,400,000 Costs and recognized profit in excess of billings 1,050,000 BRIEF EXERCISE 18-4 Construction in Process 1,700,000 Materials, Cash, Payables, etc. 1,700,000 Accounts Receivable 1,200,000 Billings on Construction in Process 1,200,000 Cash 960,000 Accounts Receivable 960,000 BRIEF EXERCISE 18-6 (a) Construction Expenses 278,000 Construction in Process (Loss) 20,000* Revenue from Long-Term Contracts 258,000 (b) Loss from Long-Term Contracts 20,000*
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Construction in Process (Loss) 20,000 *[$420,000 – ($278,000 + $162,000)] BRIEF EXERCISE 18-7 Installment Accounts Receivable, 2010 150,000 Installment Sales 150,000 Cash 54,000 Installment Accounts Receivable, 2010 54,000 Cost of Installment Sales 102,000 Inventory 102,000 Installment Sales 150,000 Cost of Installment Sales 102,000 Deferred Gross Profit, 2010 48,000 Deferred Gross Profit, 2010 17,280 Realized Gross Profit on Installment Sales (32% X $54,000) 17,280 BRIEF EXERCISE 18-8 Repossessed Merchandise 275 Loss on Repossession 37*
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Deferred Gross Profit ($520 X 40%) 208 Installment Accounts Receivable 520 *[$275 – ($520 – $208)] SOLUTIONS TO EXERCISES EXERCISE 18-1 (15–20 minutes) (a) Uddin could recognize revenue at the point of sale based upon the time of shipment because the books are sold f.o.b. shipping point. Because of the return policy one might argue in favor of the cash collection basis. Because the returns can be estimated, one could argue for shipping point less estimated returns. (b) Based on the available information and lack of any information indicating that any of the criteria in GAAP were not met, the correct treatment is to report revenue at the time of shipment as the gross amount less the 12% normal return factor. This is supported by the legal test of transfer of title and the criteria in GAAP. One could be very conservative and use the 30% maximum return allowance. (c) Accounts Receivable 15,000,000 Sales Revenue—Texts 15,000,000 Sales Returns* ($15,000,000 X 12%) 1,800,000
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Allowance for Sales Returns 1,800,000 (d) Sales Returns* 200,000 Allowance for Sales Returns 1,800,000 Accounts Receivable 2,000,000 Cash 13,000,000 Accounts Receivable 13,000,000 *A debit to Sales Revenue—Texts or Sales Returns could be made here. EXERCISE 18-2 (15–20 minutes) (a) 1. 6/3 Accounts Receivable—Ann Mount 8,000 Sales 8,000 6/5 Sales Returns and Allowances 600 Accounts Receivable—Ann Mount 600 6/7 Transportation-Out 24 Cash 24 6/12 Cash 7,252 Sales Discounts (2% X $7,400) 148 Accounts Receivable—Ann Mount 7,400 2. 6/3 Accounts Receivable—Ann Mount 7,840 Sales [$8,000 – (2% X $8,000)] 7,840
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6/5 Sales Returns and Allowances 588 Accounts Receivable—Ann Mount [$600 – (2% x $600)] 588 6/7 Transportation-Out 24 Cash 24 6/12 Cash 7,252 Accounts Receivable—Ann Mount 7,252 (b) 8/5 Cash 7,400 Accounts Receivable—Ann Mount 7,252
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Chapter 18 Solutions - dCHAPTER 18 SOLUTIONS TO BRIEF...

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