Intermediate Accounting: Reporting and Analysis
Intermediate Accounting: Reporting and Analysis
2nd Edition
ISBN: 9781285453828
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
bartleby

Concept explainers

Question
Book Icon
Chapter 17, Problem 10P

1.

To determine

Compute the total estimated gross profit on the contracts.

1.

Expert Solution
Check Mark

Explanation of Solution

Contract: Contract is an agreement among two parties or more parties which includes enforceable obligations and rights. A contract can be written, oral or implied by ordinary business practices.

Calculate the total estimated gross profit:

 As of December 31
 201720182019
Contract Price$20,000,000 $20,000,000 $20,000,000
Costs incurred to date$8,000,000 $16,000,000 $18,000,000
Estimated costs to complete$6,000,000 $3,000,000 $0
Total costs estimated to date (ContractpriceEstimatedcoststocomplete)$14,000,000 $19,000,000 $18,000,000
Estimated gross profit$6,000,000$1,000,000$2,000,000

Table (1)

2.

To determine

Compute the percentage of completion for 2017, 2018 and 2019.

2.

Expert Solution
Check Mark

Explanation of Solution

Compute the percentage of completion for 2017:

Percentageofcompletionfor2017}=CostsincurredtodateCostincurredtodate+Estimatedcoststocomplete=$8,000,000$8,000,000+$6,000,000=$8,000,000$14,000,000×100=57.1%

Therefore, the percentage of completion for 2017 is 57.1%.

Compute the percentage of completion for 2018:

Percentageofcompletionfor2018}=CostsincurredtodateCostincurredtodate+Estimatedcoststocomplete=$16,000,000$16,000,000+$3,000,000=$16,000,000$19,000,000×100=84.2%

Therefore, the percentage of completion for 2018 is 84.2%.

Compute the percentage of completion for 2019:

Percentageofcompletionfor2019}=CostsincurredtodateCostincurredtodate+Estimatedcoststocomplete=$18,000,000$18,000,000+$0=$18,000,000$18,000,000×100=100%

Therefore, the percentage of completion for 2019 is 100%.

3.

To determine

Compute the percentage of completion for 2017, 2018 and 2019.

3.

Expert Solution
Check Mark

Explanation of Solution

Compute the amount of income recognized for 2017:

Incomerecognizedduring2017}=Percentcompleted×Estimatedgrossprofit=57.1%×$6,000,000=$3,426,000

Therefore, the amount of income recognized during 2017 is $3,426,000.

Compute the amount of income recognized for 2018:

Incomerecognizedduring2018}=[(Percentcompleted×Estimatedgrossprofit)(Incomerecognizedduring2017)]=[(84.2%×$1,000,000)$3,426,000]=($2,584,000)

Therefore, the amount of income recognized during 2018 is ($2,584,000).

Compute the amount of income recognized for 2019:

Incomerecognizedduring2019}=[(Percentcompleted×Estimatedgrossprofit)(Incomerecognizedduring2017+ Incomerecognizedduring2018)]=[(100%×$2,000,000)($3,426,000+ $2,584,000)]= $1,158,000

Therefore, the amount of income recognized during 2019 is $1,158,000.

4.

To determine

Journalize entries related to the project for 3 years.

4.

Expert Solution
Check Mark

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Accounting rules for Journal entries:

  • To record increase in balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
  • To record decrease in balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

Prepare journal entries:

DateAccount titles and explanationDebit ($)Credit ($)
2017Construction in progress (inventory)8,000,000 
      Accounts payable , cash, salaries, payables etc. 8,000,000
  (To record costs of construction)  
    
 Construction expense8,000,000 
 Construction in progress (Refer to requirement 3)3,426,000 
      Construction revenue ($8,000,000$3,426,000) 11,426,000
  (To record gross profit)  
    
 Accounts receivable8,000,000 
      Partial billings 8,000,000
  To record partial billings)  
    
 Cash6,000,000 
      Accounts receivable 6,000,000
(To record collections)
2018Construction in progress (inventory)8,000,000 
      Accounts payable , cash, salaries, payables etc. 8,000,000
  (To record costs of construction)  
    
 Construction expense8,000,000 
      Construction in progress (Refer to requirement 3)  2,584,000
      Construction revenue ($8,000,000$2,584,000) 5,416,000
  (To record gross profit)  
    
 Accounts receivable8,000,000 
      Partial billings 8,000,000
  To record partial billings)  
    
 Cash6,000,000 
      Accounts receivable 6,000,000
 (To record collections)  
    
2019Construction in progress (inventory)2,000,000 
      Accounts payable , cash, salaries, payables etc. 2,000,000
  (To record costs of construction)  
    
 Construction expense2,000,000 
 Construction in progress (Refer to requirement 3)1,158,000 
      Construction revenue ($2,000,000$1,158,000) 3,158,000
  (To record gross profit)  
    
 Accounts receivable4,000,000 
      Partial billings 4,000,000
  To record partial billings)  
    
 Cash6,000,000 
      Accounts receivable 6,000,000
 (To record collections)  
    
 Partial billings20,000,000 
      Construction in progress 20,000,000
 (To record and to close partial billings)  

Table (2)

5.

To determine

Explain the manner in which the project will be carried on the balance sheet for 2017, 2018 and 2019.

5.

Expert Solution
Check Mark

Explanation of Solution

The manner in which the project is carried on the balance sheet for the year 2017, 2018 and 2019 is explained below:

 As of December 31,
Current assets201720182019
Accounts receivable$2,000,000 $4,000,000 $2,000,000
Construction in progress$11,426,000 $16,842,000  
Less: Partial billings$8,000,000 $16,000,000  
Construction in progress in excess of billings$3,426,000$842,000 

Table (3)

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Assets Current Assets Cash Credit card receivables Accounts receivable Marketable securities Food Inventories Prepaid expenses Total Current Assets Golden Bay Balance Sheet as at December 31 Year 2018 Year 2019 $ 18,500 9,807 $ 29,400 11,208 5,983 6,882 15,400 2,000 12,880 14,700 10 800 14 900 73370 79 090 Property Plant & Equipment Land Building Equipment Furnishings $ 60,500 828,400 114,900 75,730 (330,100) 16 600 766 030 839 400 $ 60,500 884,400 157,900 81,110 (422,000) 18 300 7 80 210 859 300 Net: Accumulated depreciation China, glass, silver, & linen Total Assets Liabilities & Stockholders' Equity Current Liabilities Accounts payable Accrued expenses payable Taxes payable Current mortgage payable Total Current assets $ 19,200 4,200 12,400 26 900 62 700 $16,500 5,000 20,900 26 000 68 400 Long-term liabilities Mortgage payable Total Liabilities $ $512 800 $486 400 575 500 $555 200 Stockholders' Equity Common stock ($5 par. 40,000 shares issued & OS) $200,000 Retained earnings…
Mat lives in Barbados and is desirous of starting his own business from inheritances that his parents left him. He approached you for advice on the best type of business to register. Mr. Mat said he would love to gain benefits from any tax relief that is available that the government has to offer.  Give advice to Mr. Mat whether it would be more beneficial to start a Company or an Individual Trading Business. outline for Mr. Mat why setting up either a company, or a trading as business is more advantageous over the other.  cover matters like: Tax rates, Available tax reliefs and or tax credits Ease of operations of a company, as well as ease of operations of an individual trading business.
General accounting

Chapter 17 Solutions

Intermediate Accounting: Reporting and Analysis

Ch. 17 - Prob. 11GICh. 17 - Prob. 12GICh. 17 - Prob. 13GICh. 17 - Prob. 14GICh. 17 - Prob. 15GICh. 17 - Prob. 16GICh. 17 - If the standalone selling price of a good or...Ch. 17 - Prob. 18GICh. 17 - Prob. 19GICh. 17 - If the sellers performance creates on asset (e.g.,...Ch. 17 - Describe input and output methods used to measure...Ch. 17 - Prob. 22GICh. 17 - Prob. 23GICh. 17 - Prob. 24GICh. 17 - Prob. 25GICh. 17 - A company should recognize revenue when a. the...Ch. 17 - A contract between one or more parties creates: a....Ch. 17 - Morgan Company and its customer agree to modify...Ch. 17 - Chlorine Corp. has a contract to deliver pool...Ch. 17 - Prob. 5MCCh. 17 - Prob. 6MCCh. 17 - In accounting for a long-term construction...Ch. 17 - Prob. 8MCCh. 17 - Prob. 9MCCh. 17 - Prob. 10MCCh. 17 - CustomTee Inc. contracts with various customers to...Ch. 17 - Yankee Corp. agrees to provide Albany Company 24...Ch. 17 - Prob. 3RECh. 17 - Prob. 4RECh. 17 - Prob. 5RECh. 17 - Prob. 6RECh. 17 - VolleyElite runs a volleyball program consisting...Ch. 17 - Enterprise Solutions Inc. licenses its...Ch. 17 - Prob. 9RECh. 17 - Magical Memories sells Florida theme park vacation...Ch. 17 - Prob. 11RECh. 17 - Robotics Inc. contracts with a customer to build a...Ch. 17 - CoolShoes sells its elite tennis shoes to sports...Ch. 17 - Using the information in RE17-13, what journal...Ch. 17 - GameDay sells recreational vehicles along with...Ch. 17 - Prob. 16RECh. 17 - Using the information provided in RE17-16, prepare...Ch. 17 - Prob. 18RECh. 17 - Prob. 19RECh. 17 - Prob. 1ECh. 17 - Prob. 2ECh. 17 - Prob. 3ECh. 17 - Prob. 4ECh. 17 - Prob. 5ECh. 17 - Assume the same facts as in E17-5. On July 1,...Ch. 17 - Prob. 7ECh. 17 - Prob. 8ECh. 17 - Prob. 9ECh. 17 - Prob. 10ECh. 17 - Prob. 11ECh. 17 - Jonas Consulting enters into a contract to provide...Ch. 17 - Prob. 13ECh. 17 - Prob. 14ECh. 17 - Prob. 15ECh. 17 - Prob. 16ECh. 17 - Prob. 17ECh. 17 - Prob. 18ECh. 17 - Prob. 19ECh. 17 - Prob. 20ECh. 17 - Crazy Computer Store sells a back-to-school bundle...Ch. 17 - Each of the following is an independent situation...Ch. 17 - Prob. 23ECh. 17 - Prob. 24ECh. 17 - Prob. 25ECh. 17 - Prob. 26ECh. 17 - Prob. 1PCh. 17 - Prob. 2PCh. 17 - Prob. 3PCh. 17 - Prob. 4PCh. 17 - Prob. 5PCh. 17 - Prob. 6PCh. 17 - Prob. 7PCh. 17 - SoccerHawk Merchandise Inc. enters into a 6-month...Ch. 17 - Prob. 9PCh. 17 - Prob. 10PCh. 17 - Prob. 11PCh. 17 - Prior to ASU 2014-09 changing the principles...Ch. 17 - The first step in the revenue recognition process...Ch. 17 - Prob. 3CCh. 17 - One of the more difficult issues that companies...Ch. 17 - Prob. 5CCh. 17 - Prob. 6CCh. 17 - Prob. 7CCh. 17 - Prob. 8CCh. 17 - Revenue for a company is recognized for accounting...Ch. 17 - Prob. 10C
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning