Practice_Solutions_for_12_edition_Final_Revision_Questions

Practice_Solutions_for_12_edition_Final_Revision_Questions...

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EXERCISE 18-7 (25–30 minutes) (a) (1) Gross profit recognized in 2007: Contract price $1,000,000 Costs: Costs to date $280,000 Estimated additional costs 520,000 800,000 Total estimated profit 200,000 Percentage completion to date ($280,000/$800,000) 35% Gross profit recognized in 2007 $ 70,000 Gross profit recognized in 2008: Contract price $1,000,000 Costs: Costs to date $600,000 Estimated additional costs 200,000 800,000 Total estimated profit 200,000 Percentage completion to date ($600,000/$800,000) 75% Total gross profit recognized 150,000 Less: Gross profit recognized in 2007 70,000 Gross profit recognized in 2008 $ 80,000 EXERCISE 18-7 (Continued) (2) Construction in Process. ............................... 320,000 ($600,000 – $280,000) Materials, Cash, Payables, etc. .............. 320,000 Accounts Receivable. ..................................... 250,000 ($400,000 – $150,000) Billings on Construction in Process. .... 250,000 Cash ($320,000 – $120,000). ........................... 200,000 Accounts Receivable. ............................. 200,000
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Construction in Process. ............................... 80,000 Construction Expense. ................................... 320,000 Revenues from Long-Term Contract. ... 400,000* *$1,000,000 X [($600,000 – $280,000) ÷ $800,000] (b) Income Statement (2008)— Gross profit on long-term construction contract $ 80,000 Balance Sheet (12/31/08)— Current assets: Receivables—construction in process $ 80,000* Inventories—construction in process totaling $750,000** less billings of $400,000 $350,000 * *$80,000 = $400,000 – $320,000 **Total cost to date $600,000 2007 Gross profit 70,000 2008 Gross profit 80,000 $750,000 EXERCISE 18-8 (15–20 minutes) (a) 2007— $480,000 X $2,200,000 = $660,000 $1,600,000 2008— $2,200,000 (contract price) minus $660,000 (revenue recognized in 2007) = $1,540,000 (revenue recognized in 2008). EXERCISE 18-8 (Continued) (b) All $2,200,000 of the contract price is recognized as revenue in 2008. (c) Using the percentage-of-completion method, the following entries would be made:
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Construction in Process. ......................................... 480,000 Materials, Cash, Payables, etc. ....................... 480,000 Accounts Receivable. .............................................. 420,000 Billings on Construction in Process. ............. 420,000 Cash. .......................................................................... 350,000 Accounts Receivable. ...................................... 350,000 Construction in Process. ......................................... 180,000* Construction Expenses. .......................................... 480,000
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Practice_Solutions_for_12_edition_Final_Revision_Questions...

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