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Practice_Solutions_for_Final_Revision_Questions

# Practice_Solutions_for_Final_Revision_Questions - Practice...

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Practice Solutions for Final Revision Questions Revenue Recognition E18-8 and E18-9 EXERCISE 18-7 (25–30 minutes) (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

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EXERCISE 18-7 (Continued) 2. Construction in Process (\$600,000 – \$280,000) .... 320,000 Materials, Cash, Payables, etc ....................... 320,000 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 (15–20 minutes) (a) 2010— \$640,000 X \$2,200,000 = \$880,000 \$1,600,000 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.

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