CH 18 Solutions - EXERCISE 18-7(a 1 Gross profit recognized...

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EXERCISE 18-7 (a) 1. Gross profit recognized in 2010: Contract price. ................................................ $1,200,000 Costs: Costs to date. .......................................... $280,000 Estimated additional costs. ................... 520,000 800,000 Total estimated profit. .................................... 400,000 Percentage completion to date ($280,000/$800,000). ................................... 35% Gross profit recognized in 2010. .................. $ 140,000 Gross profit recognized in 2011: Contract price. ................................................ $1,200,000 Costs: Costs to date. .......................................... $600,000 Estimated additional costs. ................... 200,000 800,000 Total estimated profit. .................................... 400,000 Percentage completion to date ($600,000/$800,000). ................................... 75% Total gross profit recognized. ....................... 300,000 Less: Gross profit recognized in 2010. ....... 14 0,000 Gross profit recognized in 2011. ................... $ 160,000 2. Construction in Process ($600,000 – $280,000). ... 320,000 Materials, Cash, Payables, etc. ...................... 320,000
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Accounts Receivable ($500,000 – $150,000). ....... 350,000 Billings on Construction in Process. ............ 350,000 Cash ($320,000 – $120,000). ................................... 200,000 Accounts Receivable. ..................................... 200,000 Construction in Process. ........................................ 160,000 Construction Expenses. ......................................... 320,000 Revenues from Long-Term Contracts. .......... 480,000* *$1,200,000 X [($600,000 – $280,000) ÷ $800,000] (b) Income Statement (2011)— Gross profit on long-term construction contract. ......... $160,000 Balance Sheet (12/31/11)— Current assets: Receivables—construction in process. .................. $180,000* Inventories—construction in process totaling $900,000** less billings of $500,000. ................... $400,000 * *$180,000 = $500,000 – $320,000 **Total cost to date $600,000 2010 Gross profit 140,000 2011 Gross profit 160,000 $900,000 EXERCISE 18-8 (a) 2010— $640,000 X $2,200,000 = $880,000 $1,600,000
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2011—$2,200,000 (contract price) minus $880,000 (revenue recognized in 2010) = $1,320,000 (revenue recognized in 2011). (b) All $2,200,000 of the contract price is recognized as revenue in 2011. (c) Using the percentage-of-completion method, the following entries would be made: Construction in Process. ......................................... 640,000 Materials, Cash, Payables, etc. ....................... 640,000 Accounts Receivable. .............................................. 420,000 Billings on Construction in Process. ............. 420,000
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This note was uploaded on 10/24/2011 for the course ACCT 316 taught by Professor Debessay,a during the Spring '08 term at University of Delaware.

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CH 18 Solutions - EXERCISE 18-7(a 1 Gross profit recognized...

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