Percent 100 revenue recognizable to date 19500000

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Percent Complete 10% 60% 100% Revenue Recognizable to Date $195,000.00 $1,170,000.00 $1,950,000.00 Less: Prior recognized revenue $- $195,000.00 $975,000.00 Revenue Recognized $195,000.00 $975,000.00 $975,000.00 Cost to Date $150,000.00 $1,200,000.00 $2,100,000.00 Estimated Cost to Complete $1,350,000.00 $800,000.00 0 Estimated Total Cost $1,500,000.00 $2,000,000.00 $2,100,000.00 Computation of Construction Expense - Unprofitable Contract 2007 2008 2009 Revenue Recognized $195,000.00 $975,000.00 $975,000.00 Total Loss Recognized Reversal of Gross Profit $45,000.00 Total Estimated Loss on Contract $50,000.00 $95,000.00 $150,000.00 150,000.00 Construction Cost Expensed $1,070,000.00 $1,125,000.00 Journal Entry 2008 2009 Construction Expense $1,070,000.00 $1,125,000.00 Construction in Process (loss) $95,000.00 $150,000.00 Revenue from Long-Term Contract $975,000.00 $975,000.00 Construction in Process 2007 Construction Cost $150,000.00 2007 Recognized Gross Profit $45,000.00 2008 Construction Costs $1,050,000.00 2009 Construction Costs $900,000.00 2009 Recognized Loss $150,000.00 Balance $1,995,000.00
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P18-7b At At At 12/31/2007 12/31/2008 12/31/2009 Contract costs incurred to date $150,000.00 $1,200,000.00 $2,100,000.00 Estimated costs to complete the contract $1,350,000.00 $800,000.00 $- Billings to Mingxia $300,000.00 $1,100,000.00 $1,850,000.00 Completed-Contract 2007 NONE 2008 Costs to date (12/31/2008) $1,200,000.00 Estimated Costs to Complete $800,000.00 Estimated Total Costs $2,000,000.00 Deduct Contract Price $1,950,000.00 Loss Recognized in 2008 $(50,000.00) 2009 Total Costs Incurred $2,100,000.00 Total Revenue Recognized $1,950,000.00 Total Loss on Contract $(150,000.00) Deduct Loss Recognized in 2008 $(50,000.00) Loss Recognized in 2009 $(100,000.00) Journal Entries made in 2009 Billings on Construction in Process $1,950,000.00 Revenue from Long-Term Contracts $1,950,000.00 Costs of Construction $2,100,000.00 Construction in Process $2,100,000.00
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E18-15 (Installment-Sales Method and Cost Recovery) Kenny Corp., a capital goods manufacturing business that started on January 4, 2007, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales. The following data were taken from the 2007 2007 and 2008 records. Rate of gross profit current year 25% 2007 2008 Cash collected on current year’s sales 140,000 Installment sales $480,000 $620,000 Realized gross profit (25% of $140,000) 35,000 Gross profit as a percent of costs 25% 28% Gross profit to be deferred ($120,000 _x0005_ $35,000) 85000 Cash collections on sales of 2007 $140,000 $240,000 Cash collections on sales of 2008 –0– $180,000 2008 The amounts given for cash collections exclude amounts collected for interest charges. Rate of gross profit current year 28% 28% Instructions Cash collected on current year’s sales 180,000 (a) Compute the amount of realized gross profit to be recognized on the 2008 income statement, prepared Realized gross profit (28% of $180,000) $50,400 using the installment-sales method. Gross profit to be deferred ($173,600 _x0005_ $50,400) 123,200
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