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Use the following information to help with the following questions In early 2014, Beertender Company entered into a long term contract to construct a...

Use the following information to help with the following questions


In early 2014, Beertender Company entered into a long term contract to construct a bridge for Notsosober County for $10 million. The bridge will take three years to complete. In 2014, Beertender spent $2.8 million on the project, recognized $3.5 million in revenue and $.7 million in profit. In 2015, Beertender spent $4.2 million on the project, recognized $3.8 million in revenue and a $0.4 million loss. Beertender billed Notsosober $3.0 million in 2014 and $4.5 million in 2015. Notsosober paid Beertender $2.6 million in 2014 and $4.3 million in 2015. Beertender Company uses the percentage of completion method to account for all contracts. 


1.) When preparing its December 31, 2014 balance sheet, Beertender would report the following with regards to this contract:

  1. A) Current Assets of $3.9 million, and Current Liabilities of $3.0 million.
  2. B) Current Assets of $6.5 million, and no Current Liabilities.
  3. C) Current Assets of $3.9 million, and no Current Liabilities.
  4. D) Current Assets of $0.9 million, and no Current Liabilities. 


2.) When preparing its December 31, 2015 balance sheet, Beertender would report the following with regards to this contract:

  1. A) Current Assets of $7.9 million, and Current Liabilities of $7.5 million.
  2. B) Current Assets of $0.6 million, and Current Liabilities of $0.2 million.
  3. C) Current Assets of $7.3 million, and Current Liabilities of $7.5 million.
  4. D) Current Assets of $0.4 million, and no Current Liabilities. 


Use the following information to help with the following questions


Heineken Co. began a construction project in 2014 at a total contract price of $150 million. The project is scheduled for completion by 2016. During 2014, Heineken incurred $36 million of costs and estimates an additional $84 million of costs to complete the project. In 2015, Heineken incurred costs of $58.5 million and estimated an additional $40.5 million in costs to complete the project. Heineken uses the percentage-of-completion method to account for its projects. 


1.) In their 2014 income statement, Heineken would:

  1. A) Recognized no gross profit or loss on the project.
  2. B) Recognized a $6 million loss on the project.
  3. C) Recognized $9 million gross profit on the project.
  4. D) Recognized $36 million loss on the project. 


2.) In their 2015 income statement, Heineken would:

  1. A) Recognized $15 million gross profit on the project.
  2. B) Recognized $13.5 million gross profit on the project.
  3. C) Recognized $6 million gross profit on the project.
  4. D) Recognized $1.5 million gross profit on the project. 


3.) Assume that Heineken incurred costs of $63.75 million in 2015 and estimated it would cost an additional $42.75 million to complete the project. In their 2015 income statement, Heineken would:

  1. A) Recognize a $3.75 million loss on the project.
  2. B) Recognize a $5.25 million gross profit on the project.
  3. C) Recognize a $7.5 million gross profit on the project.
  4. D) Recognize no gross profit or loss on the project. 

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