Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 2DIC
To determine
Explain the reason behind adjustment of deferred income taxes with net income to cash flow from operations is addition in year 6 to and subtraction in year 9 and 10.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Supplier Corp, enters into a government contract during the year to provide computer equipment for $2,000,000. The contract consists of a single performance obligation to
provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $1,400,000. The equipment is highly specialized and has no
alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract
cancellation. Actual costs incurred during the first year of the contract were $640,000 including unexpected cost overruns of $80,000 due to labor inefficiencies.
Assume that at the end of the second year of the contract, the estimate of total costs has increased to $1,500,000 million due to an increase in cost of materials. Actual costs
incurred to date are $1,125,000, excluding year one inefficiencies.
a. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted…
Supplier Corp. enters into a government contract during the year to provide computer equipment for $3,200,000. The
contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by
Supplier Corp. for the contract are $2,240,000. The equipment is highly specialized and has no alternative uses. As
negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp.
in the event of a contract cancellation. Actual costs incurred during the first year of the contract were $1,024,000 including
unexpected cost overruns of $128,000 due to labor inefficiencies.
Assume that at the end of the second year of the contract, the estimate of total costs has increased to $2,400,000 million
due to an increase in cost of materials. Actual costs incurred to date are $1,800,000, excluding year one inefficiencies.
a. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted…
Supplier Corp. enters into a government contract during the year to provide computer equipment for $4,400,000. The contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $3,080,000 . The equipment is highly specialized and has no alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract cancellation. Actual costs incurred during the year were $1,408,000 including unexpected cost overruns of $176,000 due to labor inefficiencies. a. Would revenue be recognized over time or at a point in time for this contract? Answer Recognize revenue over time b. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded during the year. 1. Recognized revenue Answer 2. Gross profit Answer 3. Adjusted contract margin Answer
Note:-
Do not…
Chapter 3 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 3 - Need for a Statement of Cash Flows. The accrual...Ch. 3 - Articulation of the Statement of Cash Flows with...Ch. 3 - Classification of Interest Expense. Under U.S....Ch. 3 - Prob. 4QECh. 3 - Classification of Changes in Short-Term Financing....Ch. 3 - Classification of Cash Flows Related to...Ch. 3 - Treatment of Non-Cash Exchanges. The acquisition...Ch. 3 - Computing Cash Collections from Customers....Ch. 3 - Computing Cash Payments to Suppliers. Lowes...Ch. 3 - Computing Cash Payments for Income Taxes. Visa...
Ch. 3 - Interpreting the Relation between Net Income and...Ch. 3 - Interpreting the Relation between Net Income and...Ch. 3 - Interpreting Relations among Cash Flows from...Ch. 3 - Interpreting Relations among Cash Flows from...Ch. 3 - Interpreting the Statement of Cash Flows. The...Ch. 3 - Interpreting the Statement of Cash Flows. Texas...Ch. 3 - Interpreting the Statement of Cash Flows. Tesla...Ch. 3 - Interpreting the Statement of Cash Flows. Gap Inc....Ch. 3 - Prob. 19PCCh. 3 - Prob. 20PCCh. 3 - Interpreting the Statement of Cash Flows....Ch. 3 - Extracting Performance Trends from the Statement...Ch. 3 - Interpreting a Direct Method Statement of Cash...Ch. 3 - Prob. 24PCCh. 3 - Preparing a Statement of Cash Flows from Balance...Ch. 3 - Prob. 26PCCh. 3 - Preparing a Statement of Cash Flows from Balance...Ch. 3 - Prob. 1AICCh. 3 - Prob. 1BICCh. 3 - Prob. 1CICCh. 3 - Prob. 1DICCh. 3 - Prob. 1EICCh. 3 - Prob. 1FICCh. 3 - Prob. 1GICCh. 3 - Prob. 1HICCh. 3 - Prob. 2AICCh. 3 - Prob. 2BICCh. 3 - Prob. 2CICCh. 3 - Prob. 2DICCh. 3 - Prob. 2EICCh. 3 - Prob. 2FICCh. 3 - Prob. 3IC
Knowledge Booster
Similar questions
- Entity A is a Hong Kong-based limited company that participates in the building material industry for many years. It sells high-quality raw materials to different local and foreign manufacturers. Entity B is one of its loyal customers for more than 30 years. On 1 January 2020, Entity A received an advanced payment of $3,600,000 from Entity B through the Hong Kong City Bank for selling Material X. According to the contract terms, Entity A would only deliver Material X to Entity B on 31 December 2020. The regular cash-selling price of Material X was $3,600,000. The cost of sales of Material X was $2,563,000. On 1 January 2021, Entity A entered into another contract with Entity B. This contract stated that Entity A was required to transfer Material Y and Material Z to Entity B in exchange for $681,500. According to the contract terms, Entity A could invoice this full amount on 31 January 2021. Material Y was to be delivered on 28 February 2021 and Material Z was to be delivered on…arrow_forwardplease help mearrow_forwardSandhill Communications contracted to set up a call center for the City of Phoenix. Under the terms of the contract, Sandhill Communications will design and set-up a call center with the following costs: Design of call center $18000 Computers, servers, telephone equipment $510000 Software $150000 Installation and testing of equipment $26000 Selling commission $46000 Annual service contract $80000 In addition, Sandhill Communications will maintain and service the equipment and software to ensure smooth operations of the call center for an annual fee of $160000. Ownership of equipment installed remains with the City of Phoenix. The contract costs that should be capitalized is $678000. $830000. $660000. $750000.arrow_forward
- WatchNU is a company that designs and manufacturers drones for military use. The supply manager is getting ready to renegotiate the contract with the security service provider that it uses for its offices and manufacturing plant. Three suppliers responded to the RFP for security services for the next three years. The current security services provider, SecurelT quoted $920,000 per year. Two suppliers that have not been used by WatchNU in the past quoted $835,000 and $742,000 respectively. The supply manager is also analyzing the costs associated with insourcing security services rather than using a supplier as a way to reduce costs and provide greater control over security. The salary and benefits for a full-time security services manager is estimated to be $91,000. Other fixed costs are estimated to be $21,000/year. Three security guards are needed 24 hours/day, 365 days per year. The salary and benefits for the security guards is $26/hour. a. What are the costs to insource the…arrow_forwardOn July 15, 2020, Dahlin signed a contract to provide Sabre-Fresh Baking Co. with 100 ingredient-weighing systems for a price of $900 each. Each system includes finely tuned scales, a computer terminal, and a one-year (12 month) contract to service Sabre-Fresh's automated equipment on an as-needed basis. The scales, computers, and service contracts are all separately identifiable and are capable of being used on their own or with products obtained from other sources. If Dahlin was to provide these goods or services separately, it would charge $600 for the scales, $100 for the computer, and $300 for the service contract. Dahlin delivered and installed the scales and computers on August 1, 2020, and the service contract began on that date. Answer the following questions in the box below, numbering your answers to keep consistent with the questions asked: Q1: How many performance obligations are included in this contract? Q2: What is the transaction price? Q3: How much of the transaction…arrow_forwardSage Reclaimers entered into a contract with Pronghorn Demolition to manage the processing of recycled materials on Pronghorm various demolition projects. Services for the 3-year contract include collecting, sorting, and transporting reclaimed materials to recycling centers or contractors who will reuse them. Sage incurs selling commission costs of $2,180 to obtain the contract. Before performing the services, Sage also designs and builds receptacles and loading equipment that interfaces with Pronghorn demolition equipment at a cost of $25,100. These receptacles and equipment are retained by Sage and can be used for other projects. Pronghorn promises to pay a fixed fee of $12,850 per year, payable every 6 months for the services under the contract. Sage incurs the following costs: design services for the receptacles to interface with Pronghorn equipment $3,220, loading equipment controllers $6,400, and special testing and OSHA inspection fees $2,180 (some of Pronghorn projects are on…arrow_forward
- JetTaxi is a passenger airplane line that contracts with larger, well-known lines to provide transportation across the United States. JetTaxi owns 30 aircraft, and currently has contracts for 20 of those aircraft. JetTaxi normally charges $2,700,000 each year per jet to provide the carrier services. Each JetTaxi plane incurs yearly costs of $600,000 for labor, $200,000 for fuel, $400,000 in fixed overhead, and $800,000 in variable overhead. JetTaxi is considering a new contract where they would provide 5 airplanes to a new company for $2,000,000 each year per jet. Should JetTaxi accept the contract? Why? Group of answer choices No, because the differential net income would be zero. Yes, because the differential net income would be $1.6M. No, because the differential net income would be - $2M. Yes, because the differential net income would be $2M.arrow_forwardJason's Reclaimers entered into a contract with Gary's Demolition to manage the processing of recycled materials on Gary's various demolition projects. Services for the 3-year contract include collecting, sorting, and transporting reclaimed materials to recycling centers or contractors who will reuse them. Jason's incurs selling commission costs of $2,180 to obtain the contract. Before performing the services, Jason's also designs and builds receptacles and loading equipment that interfaces with Gary's demolition equipment at a cost of $25,100. These receptacles and equipment are retained by Jason's and can be used for other projects. Gary's promises to pay a fixed fee of $12,850 per year, payable every 6 months for the services under the contract. Jason's incurs the following costs: design services for the receptacles to interface with Gary's equipment $3,220, loading equipment controllers $6,400, and special testing and OSHA inspection fees $2,180 (some of Gary's projects are on…arrow_forwardJUBAIL BUILDERS is constructing a multi-unit residential complex. In the prior year, JUBAIL BUILDERS entered into a contract with a customer for a specific unit that is under construction. JUBAIL has determined that the contract is a single performance obligation satisfied over time. JUBAIL BUILDERS gathered the following information for the contract during the year. JUBAIL BUILDERS-Year Ended December 31, 2018: Costs to date 10,500,000 Future expected costs 7,000,000 Work certified to date 12,600,000 Expected Sales value 22,400,000 Revenue taken in earlier period 8,400,000 Costs taken in earlier periods 6,650,000 Calculate the amounts to be included in the statement of profit or loss in respect of revenue and costs for the year ended December 31, 2018 on both methods (I) Input Method (cost basis), and (II) Output Method (Sales Basis) Calculate the total expected profit for the year 2018?arrow_forward
- In 20x1, ABC Co. enters into a contract to construct a building for a customer. ABC identifies its performance obligation to be satisfied over time. ABC measures its progress on the contract based on costs incurred. The contract price is P20,000,000. ABC has an unconditional right to all billings made in accordance with the billing schedule stated in the contract. Information on the construction is as follows: 20x1 20x2 Contract costs incurred per year Billings per year Collections on billings 20x3 8,160,000 7,320,000 1,920,000 10,000,000 7,000,000 3,000,000 9,500,000 6,650,000 3,850,000 per year Estimated costs to 1911 complete (at each year-end)er from the Student Ha8,840,000 of 1,720,000 "Cheating during examinations, quizzes or plagiarism in connection with any academic work, abetting of the same: 1st violation- How much profit is recognized on the contract in 20x3? suspension with invalidation of grade; 3rd violation- suspensionarrow_forwardEntity Suppliers contracts with its customer to deliver an imaging device and 50 replacement cartridges to be used with the device. The contract price for the device is $100,000, and the cartridges, which are expected to be delivered over six months, are priced at $1,000 each. The stand-alone selling price for the device is $100,000, and the stand-alone selling price for each replacement cartridge is $1,250. The allocation of the transaction price based on the relative selling prices is as follows: Imaging device Cartridges Standalone selling price $100,000 62,500 $162,500 % of total 61,5% 38.5% 100% Allocation of the contract prices $92,250 57,750 $150,000 After Entity Suppliers has delivered the imaging device and 40 cartridges, the parties agree to modify the contract to increase the total number of cartridges. Required: For each of the following scenarios, determine if a separate contract is created by the modification and describe the accounting for revenue recognition. a. Entity…arrow_forwardNance Network Consultants, Incorporated uses the percentage-of-completion method to account for its long-term contracts. It uses the cost-to-cost approach to measure progress. During the current year, Nance signed a contract to develop a computer network for an international accounting firm. Information related to the contract follows. Prepare the t-accounts for construction in progress, billings on construction in progress, and accounts receivable. Determine the net asset (liability) for each year of the contract on December 31.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning