Total Construction Fixed Price $8,000,000
Construction Start Date March 3, 2012
Construction Complete Date December 4, 2013
As of Dec 31… 2012 2013
Actual cost incurred $2,500,000 $3,150,000
Estimated remaining costs $3,750,000 $-
Billed to customer $2,400,000 $5,300,000
Received from customer $2,250,000 $5,400,000
Assuming Platypus Building Inc. uses the completed contract method, what amount of gross profit would be recognized in 2013?
2. (TCO A) Kerry Corp purchased a used bottling machine from Bob's Bottling Inc. on Jan 1, 2012 for $2100000. Bob accounted for the sale correctly under the installment sales method. It had a book value of $1575000. Kerry paid with $300000 cash and a note for $1800000 with an annual interest of 10%. Kerry agreed to make equal annual payments of $600000. Kerry Corp made their first payment on Jan 1, 2013 of $780000 which included interest of $180000 to date of payment.
As of Dec 31, 2013 Bob has deferred gross profit of ?
3. (TCO A) Blue Suede Construction Corp used the percentage-of-completion method of revenue recognition. They were contracted to build the new amphitheater for $800000. Additional information was provided:
As of Dec 31…. 2012 2013
Percentage of completion 15% 40%
Estimated total expected costs $550,000 $580,000
Gross profit recognized (Cumulative) $50,000 $99,000
Contracted costs incurred during 2013 were… (Points : 5)
4. (TCO A) In industries with high rates of return (such as a magazine distribution company) an alternative method of revenue recognition would be
• record sales net of an estimate of expected future returns
• record sales in current period and returns in future periods as they occur
• do not record any sales until expiration of all return privileges have passed
• all of the above
This question was asked on Jan 16, 2013 and answered on Jan 17, 2013.
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