exam2solutionsinword - QUESTION 1 12 points The Ugenti...

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QUESTION 1 12 points The Ugenti Construction Company contracted to construct a warehouse building for $2,600,000. Construction began in 2009 and was completed in 2010. Data relating to the contract are summarized below: 2009 2010 Costs incurred during the year. ................ $ 360,000 $1,650,000 Estimated costs to complete as of 12/31. . 1,560,000 - Billings during the year . .......................... 430,000 2,170,000 Cash collections during the year. ............. 320,000 2,280,000 Required: 1. Compute the amount of gross profit or loss to be recognized in 2009 and 2010 using the percentage-of-completion method. 2. Compute the amount of gross profit or loss to be recognized in 2009 and 2010 using the completed contract method. 3. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2009 using the percentage-of completion method. 4. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2009 using the completed contract method. Requirement 1 2009 2010 Contract price $2,600,000 $2,600,000 Actual costs to date 360,000 2,010,000 Estimated costs to complete 1,560,000 - 0 - Total estimated costs 1,920,000 2,010,000 Estimated (actual) gross profit $ 680,000 $ 590,000 Gross profit recognition: 2009: $ 360,000 = 18.75% x $680,000 = $127,500 $1,920,000 2010: $590,000 - 127,500 = $462,500 Requirement 2 2009 $ - 0 - 2010 $590,000 Solution:
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Requirement 3 Balance Sheet At December 31, 2009 Current assets: Accounts receivable $ 110,000 Costs and profit ($487,500) * in excess of billings ($430,000) 57,500 * Costs ($360,000) + profit ($127,500) Exercise 5-2 (concluded) Requirement 4 Balance Sheet At December 31, 2009 Current assets: Accounts receivable $ 110,000 Current liabilities: Billings ($430,000) in excess of costs ($360,000) $ 70,000
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Question 2 – 12 points The Gadzooks Chip Company offers credit terms to its customers. At the end of 2009, accounts receivable totaled $2,223,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $68,000 at the beginning of 2009 and $46,200 in receivables was written off during the year as uncollectible. No previously written off receivables were collected. The company estimates bad debts by applying a percentage of 3% to accounts receivable at the end of the year. Required: 1. Prepare journal entries to record the write-off of receivables and the year-end adjusting entry for bad debt expense. 2. How would accounts receivable be shown in the 2009 year-end balance sheet? Solutions Requirement 1 To record the write-off of receivables. Allowance for uncollectible accounts.
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exam2solutionsinword - QUESTION 1 12 points The Ugenti...

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