Ch5IntermedTheory

Ch5IntermedTheory - Chapter 05 - Income Measurement and...

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Chapter 05 - Income Measurement and Profitability Analysis Requirement 1 ($ in millions) 2011 2012 2013 Contract price $220 $220 $220 Actual costs to date 40 120 170 Estimated costs to complete 120 60 - 0 - Total estimated costs 160 180 170 Estimated gross profit (actual in 2013) $ 60 $ 40 $ 50 Gross profit (loss) recognition: 2011: $40 = 25% x $60 = $15 $160 2012: $120 = 66.67% x $40 = $26.67 – $15 = $11.67 $180 2013: $220 – 170 = $50 – ($15 + 11.67) = $23.33 Requirement 2 2011: $220 x 25% = $55 2012: $220 x 66.67% = $146.67 – 55 = $91.67 2013: $220 – 146.67 = $73.33 Requirement 3 Year Gross profit (loss) recognized 2011 - 0 - 2012 - 0 - 2013 50 Total project income $50 5-1 Chapter  5     Income Measurement and Profitability Analysis EXERCISES Exercise 5-10
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Chapter 05 - Income Measurement and Profitability Analysis Requirement 1 2011 2012 2013 Contract price $8,000,000 $8,000,000 $8,000,000 Actual costs to date 2,000,000 4,500,000 8,300,000 Estimated costs to complete 4,000,000 3,600,000 - 0 - Total estimated costs 6,000,000 8,100,000 8,300,000 Estimated gross profit (loss) (actual in 2013) $2,000,000 $ (100,000 ) $ (300,000 ) Gross profit (loss) recognition: 2011: $2,000,000 = 33.3333% x $2,000,000 = $666,667 $6,000,000 2012: $(100,000) – 666,667 = $(766,667) 2013: $(300,000) – (100,000) = $(200,000) 5-2 Exercise 5-11
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Chapter 05 - Income Measurement and Profitability Analysis Exercise 5-11 (continued) Requirement 2 2011 2012 Construction in progress 2,000,000 2,500,000 Various accounts 2,000,000 2,500,000 To record construction costs. Accounts receivable 2,500,000 2,750,000 Billings on construction contract 2,500,000 2,750,000 To record progress billings. Cash 2,250,000 2,475,000 Accounts receivable 2,250,000 2,475,000 To record cash collections. Construction in progress (gross profit) 666,667 Cost of construction 2,000,000 Revenue from long-term contracts (33.3333% x $8,000,000) 2,666,667 To record gross profit. Cost of construction (2) 2,544,000 Revenue from long-term contracts (1) 1,777,333 Construction in progress (loss) 766,667 To record expected loss. (1) and (2): Percent complete = $4,500,000 ÷ $8,100,000 = 55.55% Revenue recognized to date: 55.55% x $8,000,000 = $4,444,000 Less: Revenue recognized in 2011 (above) (2,666,667 ) Revenue recognized in 2012 1,777,333 (1) Plus: Loss recognized in 2012 (above) 766,667 Cost of construction, 2012 $2,544,000 (2) 5-3
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This note was uploaded on 10/25/2011 for the course ACG 3341 taught by Professor Jomosankara during the Spring '09 term at FAU.

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Ch5IntermedTheory - Chapter 05 - Income Measurement and...

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