Title | CHAPTER 18 Revenue Recognition OPTIONAL ASSIGNMENT CHARACTERISTICS TABLE |
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Author | Chyta Sror |
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CHAPTER 18 Revenue Recognition OPTIONAL ASSIGNMENT CHARACTERISTICS TABLE Item Description BE18-7 Journal entries under percentage-of-completion method. BE18-9 Journal entries under completed-contract method. BE18-10 Balance sheet presentation of construction contract. BE18-12 Installment-sales metho...
CHAPTER 18 Revenue Recognition OPTIONAL ASSIGNMENT CHARACTERISTICS TABLE Item
Description
BE18-7 BE18-9 BE18-10 BE18-12 BE18-13 BE18-15
Journal entries under percentage-of-completion method. Journal entries under completed-contract method. Balance sheet presentation of construction contract. Installment-sales method entries. Installment-sales default & repossession. Cost-recovery method.
E18-14 E18-15 E18-16 E18-17 E18-18 E18-19 E18-23 E18-25 E18-26
Gross profit on uncompleted contract. Recognition of profit, percentage-of-completion. Recognition of revenue on long-term contract and entries. Recognition of profit and balance sheet amounts for long-term contracts. Long-term contract reporting. Installment-sales method calculations, entries. (a. and c. only) Installment-sales method and cost-recovery method. (case 2) Installment-sales default & repossession. Installment-sales default & repossession (repossession/reconditioning entry only).
P18-2 P18-4 P18-6 P18-9 P18-11 P18-17
Recognition of profit on long-term contract. Recognition of profit and balance sheet presentation, percentage-of-completion. Long-term contract with interim loss. Installment-sales income statements (just calculate gross profit realized for each year). Installment-sales entries (a. , b., and c. only) Comprehensive problem—long-term contracts.
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BRIEF EXERCISE 18-7 Construction in Process ................................................................................ Cash, Materials, Payables, etc. ..........................................................
1,700,000
Accounts Receivable ..................................................................................... Billings on Construction in Process ....................................................
1,200,000
Cash ............................................................................................................ Accounts Receivable ..........................................................................
960,000
Construction in Process [($1,700,000 / 5,000,000) = 34% X $2,000,000] ... Construction Expenses ................................................................................. Revenue from Construction Contract ($7,000,000,000 X 34%) .........
680,000 1,700,000
1,700,000 1,200,000 960,000
2,380,000
BRIEF EXERCISE 18-9 Construction in Process ...................................................................................... Cash, Materials, Payables, etc. ................................................................
1,700,000
Accounts Receivable ........................................................................................... Billings on Construction in Process ..........................................................
1,200,000
Cash .................................................................................................................. Accounts Receivable ................................................................................
960,000
1,700,000 1,200,000 960,000
BRIEF EXERCISE 18-10 Current Assets Accounts Receivable ............................................................................... Inventories Construction in process ................................................................ Less: Billings ................................................................................ Costs in excess of billings .................................................................
$240,000 $1,715,000 1,000,000 715,000
BRIEF EXERCISE 18-12 Installment Accounts Receivable ....................................................................... Installment Sales .....................................................................................
150,000
Cost of Installment Sales ........................................................................................ Inventory ......................................................................................................
102,000
Cash ................................................................................................................. Installment Accounts Receivable ............................................................
150,000 102,000 54,000 54,000
Installment Sales ....................................................................................................... Cost of Installment Sales ................................................................................ Deferred Gross Profit .....................................................................................
150,000
Deferred Gross Profit ............................................................................................... Realized Gross Profit (32% X $54,000) ......................................................... [gross profit % = ($150,000 − $102,000) = $48,000 / $150,000 = 32%]
17,280
102,000 48,000 17,280
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BRIEF EXERCISE 18-13 Repossessed Inventory ...................................................................................... Deferred Gross Profit ($520 x 40%) ....................................................................... Loss on Repossession ....................................................................................... Installment Accounts Receivable ............................................................
275 208 37 520
BRIEF EXERCISE 18-15 Year 2012 2013 2014
Cash Collections $10,000 5,000 5,000
Cost Recovery* $10,000 3,000 0
Gross Profit Realized $0 2,000 5,000
* must recover $13,000 before Gross Profit realized EXERCISE 18-14 Estimated contract cost at completion ($800,000 + $1,200,000) Fixed fee ..................................................................................................................... Total contract price ..................................................................................................... Total estimated cost ................................................................................................... Gross profit ................................................................................................................. Percentage of completion ($800,000 / $2,000,000) ................................................... Gross profit to be recognized ($450,000 X 40%) .......................................................
$2,000,000 450,000 2,450,000 2,000,000 450,000 40% $ 180,000
EXERCISE 18-15 (a) (1) Contract price (revenue) Costs incurred to date Estimated costs to complete Estimated total costs Estimated total profit
2012 $1,200,000 280,000 520,000 800,000 $400,000
% completion for 2012: $280,000 / $800,000 = 35% GP = gross profit 2012: $400,000 x 35% = $140,000 − $0 2013: $400,000 x 75% = $300,000 − $140,000 (a)
2.
2013 $1,200,000 600,000 200,000 800,000 $400,000 for 2013: $600,000 / $800,000 = 75% GP recognized $140,000 160,000
Construction in Process ($600,000 – $280,000) ......................................... Cash, Materials, Payables, etc. ......................................................
320,000
Accounts Receivable ($500,000 – $150,000) ........................................... Billings on Construction in Process ................................................
350,000
Cash ($320,000 – $120,000) ..................................................................... Accounts Receivable ......................................................................
200,000
Construction in Process ............................................................................. Construction Expenses .............................................................................. Revenues from Construction Contracts [$1,200,000 X (75% – 35%)]
160,000 320,000
320,000 350,000 200,000
480,000
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EXERCISE 18-15 continued (b)
Income Statement (2013) Revenues from Construction Contracts ...................................................$480,000 Construction Expenses ...............................................................................320,000 Gross profit on long-term construction contract ...................................................... Balance Sheet (12/31/13) Current assets: Accounts Receivable ($500,000 – $320,000)............................................... Inventories: Construction in Process ($600,000 + $300,000) .................... $900,000 Less: Billings .......................................................................... (500,000) Costs and recognized profit in excess of billings ....................................
$160,000
$180,000
$400,000
EXERCISE 18-16 (a) Contract price (revenue) Costs incurred during year Costs incurred to date Estimated costs to complete Estimated total costs Estimated total profit
2012 $2,200,000 $640,000 640,000 960,000 1,600,000 $600,000
2013 $2,200,000 $1,425,000 2,065,000 0 2,065,000 $135,000
% completion for 2012: $640,000 / $1,600,000 = 40% 2012: $2,200,000 x 40% = $880,000 − $0 2013: $2,200,000 x 100% = $2,200,000 − $880,000
Revenue recognized $ 880,000 1,320,000
(b)
All $2,200,000 of the contract price is recognized as revenue in 2013.
(c)
Construction in Process............................................................................... Cash, Materials, Payables, etc. ........................................................
640,000
Accounts Receivable ................................................................................... Billings on Construction in Process ..................................................
420,000
Cash .......................................................................................................... Accounts Receivable ........................................................................
350,000
Construction Expenses................................................................................ Construction in Process ($600,000 x 40%) ................................................. Revenue from Construction Contract ..............................................
640,000 240,000
640,000 420,000 350,000
880,000
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EXERCISE 18-17 Contract price (revenue) Costs incurred to date Estimated costs to complete Estimated total costs Estimated total profit (a)
2012 $6,000,000 1,185,800 4,204,200 5,390,000 $610,000
Gross Profit to Be Recognized: $0; no gross profit to be recognized prior to completion of contract. Billings in Excess of Costs: Construction in Process.............................................................................................. Billings ($6,000,000 x 25%) ........................................................................................ Billings in Excess of Costs .........................................................................................
(b)
$ 1,185,800 (1,500,000) $ (314,200)
Gross Profit to Be Recognized: Percentage-of-completion: ($1,185,800 / $5,390,000) = 22% Gross profit to be recognized: ($610,000 X 22%) = $ 134,200 Billings and Recognized Profits in Excess of Costs: Construction in Process ($1,185,800 + $134,200) ..................................................... Billings ($6,000,000 x 25%) ........................................................................................ Billings and Recognized Profits in Excess of Costs ...................................................
$ 1,320,000 (1,500,000) $ (180,000)
EXERCISE 18-18 BERSTLER CONSTRUCTION COMPANY Partial Income Statement Year Ended December 31, 2012 Revenue from construction contract (Project 3) ...................................................................... Construction expenses (Project 3) .......................................................................................... Gross profit .............................................................................................................................. Loss on construction contract (Project 1)* .............................................................................. * Contract price.............................................................................. Total estimated costs ($450,000 + $130,000) ............................ Total estimated loss (recognize in 2010) ....................................
$520,000 330,000 190,000 (20,000)
$ 560,000 580,000 $ (20,000 )
BERSTLER CONSTRUCTION COMPANY Partial Balance Sheet December 31, 2012 Current assets: Accounts receivable ($1,080,000 – $990,000) ....................................... Inventories: Construction in process ($450,000 – $20,000) .............................. Less: Billings ............................................................................... Costs and recognized loss in excess of billings (Project 1) ........ Current liabilities: Billings on construction contract .................................................. Construction in process ................................................................ Billings in excess of costs (Project 2) ..........................................
$90,000 $430,000 (360,000) $70,000 $220,000 126,000 $94,000
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EXERCISE 18-19 (a) Gross profit rate: 2012: ($900,000 – $594,000) / $900,000 2013: ($1,000,000 – $680,000) / $1,000,000 Gross profit realized: 2012: $370,000 X 34% 2013: on 2012 = $350,000 X 34% on 2013 = $450,000 X 32% Total (b)
2012
2013
34% 32% $125,800 $125,800
$119,000 144,000 $263,000
Installment Accounts Receivable ........................................................... Installment Sales .........................................................................
1,000,000
Cost of Installment Sales ........................................................................ Inventory ......................................................................................
680,000
Cash ($350,000 + $450,000) ...................................................................... Installment Accounts Receivable ..........................................................
800,000
Installment Sales .......................................................................................... Cost of Installment Sales ................................................................... Deferred Gross Profit .........................................................................
1,000,000
Deferred Gross Profit ..................................................................................... Realized Gross Profit ........................................................................
263,000
1,000,000 680,000 800,000 680,000 320,000 263,000
EXERCISE 18-23 (a. and c. only) (a)
Must convert gross profit as a percentage of costs to gross profit as a percentage of sales: 2012 = 25% / (100% + 25%) = 20% 2013 = 28% / (100% + 28%) = 21.875% Gross profit realized: 2013: on 2012 = $240,000 X 20% on 2013 = $160,000 X 21.875% Total
$48,000 35,000 $83,000
(c) 2012 2013: on 2010 sales on 2011 sales
Cash Collections $130,000 240,000 160,000
Cost Recovery* $130,000 240,000 160,000
Gross Profit Realized $0 0 0
* 2012: must recover $384,000 [$480,000 x (100% − 20%)] before GP realized 2013: must recover $484,375 [$620,000 x (100% − 21.875%)] before GP realized EXERCISE 18-25 (case 2) Repossessed Inventory ...................................................................................... Deferred Gross Profit [$780 x ($1,500 − $1,200) / $1,500)] .................................. Installment Accounts Receivable [$1,500 − $240 – ($80 x 6)] ................ Gain on Repossession ............................................................................
750 156 780 126
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EXERCISE 18-26 (repossession/reconditioning entry only) Repossessed Inventory ..................................................................................... Deferred Gross Profit ($1,300 x 30%) .................................................................... Loss on Repossession ....................................................................................... Installment Accounts Receivable ($1,800 − $500) .................................. Cash ........................................................................................................
650 390 320 1,300 60
PROBLEM 18-2 (a) Contract price Costs to date Estimated cost to complete Estimated total cost Estimated total gross profit
(b)
2012 $900,000 270,000 330,000 600,000 $300,000
2013 $900,000 450,000 150,000 600,000 $300,000
% completion for 2012: $270,000 / $600,000 = for 2013: $450,000 / $600,000 =
45% 75%
GP = gross profit 2012: $300,000 x 45% = $135,000 − $0 2013: $300,000 x 75% = $225,000 − $135,000 2014: $290,000 x 100% = $290,000 − $225,000
GP recognized $135,000 90,000 65,000
2014 $900,000 610,000 0 610,000 $290,000
In 2012 and 2013, $0 gross profit would be recognized. In 2014, all $290,000 is recognized.
PROBLEM 18-4 (a) Contract price Costs to date Estimated cost to complete Estimated total cost Estimated total gross profit
(b)
2012 $6,600,000 1,620,000 3,780,000 5,400,000 $1,200,000
2013 $6,600,000 3,850,000 1,650,000 5,500,000 $1,100,000
% completion for 2012: $1,620,000 / $5,400,000 = for 2013: $3,850,000 / $5,500,000 =
30% 70%
GP = gross profit 2012: $1,200,000 x 30% = $360,000 − $0 2013: $1,100,000 x 70% = $770,000 − $360,000 2014: $1,010,000 x 100% = $1,010,000 − $770,000
GP recognized $360,000 410,000 240,000
2014 $6,510,000 5,500,000 0 5,500,000 $1,010,000
HEWITT CONSTRUCTION COMPANY Balance Sheet December 31, 2013 Current assets: Accounts receivable ($3,300,000 – $2,800,000) .............. Inventories: Construction in process ($3,850,000 + $770,000) .... Less: Billings ........................................................... Costs and recognized profit in excess of billings
$ 500,000 $4,620,000 (3,300,000) 1,320,000
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PROBLEM 18-6 (a) Contract price Costs incurred during year Costs to date Estimated cost to complete Estimated total cost Estimated total gross profit
2012 $8,400,000 2,880,000 2,880,000 3,520,000 6,400,000 $2,000,000
2013 $8,400,000 2,230,000 5,110,000 2,190,000 7,300,000 $1,100,000
% completion for 2012: $2,880,000 / $6,400,000 = ...