ACCT303 Chapter 3 Homework Solutions[1]

# ACCT303 Chapter 3 Homework Solutions[1] - E3-2 Determining...

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1 E3-2. Determining gross profit using percentage-of-completion The gross profit for the percentage-of-completion method is as follows: Contract price \$3,000,000 Cost to date \$1,800,000 Est. cost to complete 600,000 Total cost 2,400,000 Expected gross profit 600,000 Percentage complete (18/24) 75% Profit to recognize date 450,000 Profit previously recognized (300,000) 2012 gross profit \$ 150,000 E3-12. Franchise sales; revenue recognition Requirement 1: April 1, 2011 To record franchise agreement and down payment DR Cash \$60,000 DR Note receivable 240,000 CR Unearned franchise fee revenue \$300,000 Requirement 2: August 15, 2011 To recognize franchise fee revenue DR Unearned franchise fee revenue \$300,000 CR Franchise fee revenue \$300,000 P3-4. Income recognition on long-term contracts. Requirement 1: a. No income will be recognized in 2011 under the completed-contract method as the project is not complete. b. Income for 2011 = \$8,000,000 x (\$30,000,000 – \$24,000,000) \$24,000,000 = .33 x \$6,000,000 = \$2,000,000

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2 Note: Materials purchased but not used are not included in the numerator of the cost percentage for 2011 but are included in the estimated total project costs (\$8,000,000 + \$15,500,000 + \$500,000). Requirement 2:
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ACCT303 Chapter 3 Homework Solutions[1] - E3-2 Determining...

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