Johnson Inc. enters into a $300,000 contract for the purchase of customized equipment with Builder Inc. The construction of the equipment is expected to take two years. Johnson Inc. owns the work in process during the two-year period but will not take possession of the equipment until completed. The contractor will bill Johnson monthly for performance completed to date. After year-one, Builder Inc. incurred costs of $120,000 and expects remaining costs to be $108,000. Builder Inc. has billed Johnson $150,000 in total for the year. Johnson has paid $135,000 to Builder Inc. Determine the amount of revenue and expenses that Builder Inc. should recognize in the first year of the contract. a. Revenue Expenses $157,895 $120,000 b. Revenue Expenses $150,000 $114,000 c. Revenue Expenses $78,947 $120,000 d. Revenue Expenses $0 $0 e. Revenue Expenses $150,000 $120,000
Johnson Inc. enters into a $300,000 contract for the purchase of customized equipment with Builder Inc. The construction of the equipment is expected to take two years. Johnson Inc. owns the work in process during the two-year period but will not take possession of the equipment until completed. The contractor will bill Johnson monthly for performance completed to date. After year-one, Builder Inc. incurred costs of $120,000 and expects remaining costs to be $108,000. Builder Inc. has billed Johnson $150,000 in total for the year. Johnson has paid $135,000 to Builder Inc. Determine the amount of revenue and expenses that Builder Inc. should recognize in the first year of the contract. a. Revenue Expenses $157,895 $120,000 b. Revenue Expenses $150,000 $114,000 c. Revenue Expenses $78,947 $120,000 d. Revenue Expenses $0 $0 e. Revenue Expenses $150,000 $120,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Johnson Inc. enters into a $300,000 contract for the purchase of customized equipment with Builder Inc. The construction of the equipment is expected to take two years. Johnson Inc. owns the work in process during the two-year period but will not take possession of the equipment until completed. The contractor will bill Johnson monthly for performance completed to date. After year-one, Builder Inc. incurred costs of $120,000 and expects remaining costs to be $108,000. Builder Inc. has billed Johnson $150,000 in total for the year. Johnson has paid $135,000 to Builder Inc. Determine the amount of revenue and expenses that Builder Inc. should recognize in the first year of the contract.
a.
| Revenue | Expenses | |
|---|---|---|
| $157,895 | $120,000 |
b.
| Revenue | Expenses | |
|---|---|---|
| $150,000 | $114,000 |
c.
| Revenue | Expenses | |
|---|---|---|
| $78,947 | $120,000 |
d.
| Revenue | Expenses | |
|---|---|---|
| $0 | $0 |
e.
| Revenue | Expenses | |
|---|---|---|
| $150,000 | $120,000 |
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