Su06Ch18_Solutions - Chapter 18 Revenue Recognition Homework Solutions EXERCISE 18-5(10-15 minutes(a Contract billings to date Less accounts receivable

# Su06Ch18_Solutions - Chapter 18 Revenue Recognition...

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Chapter 18: Revenue Recognition Homework Solutions EXERCISE 18-5 (10-15 minutes) (a) Contract billings to date \$61,500 Less accounts receivable 12/31/04 21,500 Portion of contract billings collected \$40,000 \$18,200 (b) \$65,000 = 28% (The ratio of gross profit to revenue recognized in 2004.) \$1,000,000 X .28 = \$280,000 (The initial estimated total gross profit before tax on the contract.) EXERCISE 18-11 (15-20 minutes) (a) Computation of gross profit recognized: 2004 2005 \$370,000 X 30%* \$111,000 \$350,000 X 30%* \$105,000 \$475,000 X 32%** ______________ 152,000 \$111,000 \$257,000 * *(\$900,000 – \$630,000) ÷ \$900,000 **(\$1,000,000 – \$680,000) ÷ \$1,000,000 (b) Installment Accounts Receivable—2005 ................................................... 1,000,000 Installment Sales ............................................................................. 1,000,000 Cost of Installment Sales ............................................................................ 680,000 Inventory ......................................................................................... 680,000 Cash ............................................................................................. 825,000 Installment Accounts Receivable— 2004 .............................................................................................. 350,000 Installment Accounts Receivable— 2005 .............................................................................................. 475,000 Installment Sales ......................................................................................... 1,000,000 Cost of Installment Sales ................................................................ 680,000 Deferred Gross Profit on Installment Sales—2005 .................................................................................. 320,000 Deferred Gross Profit on Installment Sales—2004 ............................................................................................... 105,000 Deferred Gross Profit on Installment Sales—2005 ............................................................................................. 152,000 Realized Gross Profit on Installment Sales ............................................................................................. 257,000 Realized Gross Profit on Installment Sales ......................................................................................................... 257,000 Income Summary ............................................................................ 257,000