Beruflich Dokumente
Kultur Dokumente
$4,000,000
$ 850,000
1,750,000
400,000
3,000,000
$1,000,000
At the end of the first year, the following was the status of the contract:
Billings to date
Costs incurred to date
Labor
Materials and subcontractor
Indirect costs
Latest forecast total cost
$2,250,000
$ 464,000
798,000
193,000
1,455,000
3,000,000
It should be noted that included in the above costs incurred to date were standard electrical and mechanical materials stored
on the job site, but not yet installed, costing $105,000. These costs should not be considered in the costs incurred to date.
Instructions
(a)
Compute the percentage of completion on the contract at the end of 2013.
(b)
Indicate the amount of gross profit that would be reported on this contract at the end of 2013.
(c)
Make the journal entry to record the income (loss) for 2013 on Dobson's books.
(d)
Indicate the account(s) and the amount(s) that would be shown on the balance sheet of Dobson Construction at the
end of 2013 related to its construction accounts. Also indicate where these items would be classified on the balance
sheet. Billings collected during the year amounted to $1,980,000.
(e)
Assume the latest forecast on total costs at the end of 2013 was $4,080,000. How much income (loss) would Dobson
report for the year 2013?
Solution 18-132
(a)
Costs to date
Less materials on job site
$1,455,000
(105,000)
$1,350,000
45% $4,000,000 =
Costs incurred
Gross profit
(c)
Construction Expenses....................................................................................................
1,350,000
Construction in Process...................................................................................................
450,000
Revenue from Long-Term Contracts................................................................
1,800,000
Current Assets
Accounts receivable
$270,000 ($2,250,000 $1,980,000)
(d)
$1,800,000
1,350,000
$ 450,000
Current Liability
Billings in excess of contract costs and
recognized profit
(e)
$50,000
($2,250,000 $2,200,000)
$4,000,000
4,080,000
$ (80,000)
been engaged to assist Ogle's controller in the preparation of a presentation to be given at the board meeting. The controller
provides you with the following information:
1.
2.
Project
A
B
C
D
E
Contract Costs
Incurred Through
12/31/13
$ 424,000
195,000
350,000
123,000
320,000
$1,412,000
Project
A
B
C
D
E
3.
4.
Billings Through
12/31/13
$ 340,000
210,000
475,000
100,000
400,000
$1,525,000
Cash Collections
Through 12/31/11
$ 310,000
210,000
390,000
65,000
400,000
$1,375,000
Estimated
Additional Costs to
Complete Contracts
$101,000
455,000
-097,000
80,000
$733,000
Instructions
(a)
Prepare a schedule by project, computing the amount of income (or loss) before selling, general, and administrative
expenses for the year ended December 31, 2013, which would be reported under:
(1)
The completed-contract method.
(2)
The percentage-of-completion method (based on estimated costs).
(b)
Prepare the general journal entry(ies) to record revenue and gross profit on project B (second project) for 2013,
assuming that the percentage-of-completion method is used.
(c)
Indicate the balances that would appear in the balance sheet at December 31, 2013 for the following accounts for
Project D (fourth project), assuming that the percentage-of-completion method is used.
Accounts Receivable
Billings on Construction in Process
Construction in Process
(d)
How would the balances in the accounts discussed in part (c) change (if at all) for Project D (fourth project), if the
completed-contract method is used?
Solution 18-133
(a)
(1) and (2)
Projects
Contract price
Contract costs incurred
Additional costs
to complete
Total cost
Total gross profit
or (loss)
A
$510,000
424,000
B
$700,000
195,000
C
$475,000
350,000
D
$200,000
123,000
E
$460,000
320,000
101,000
525,000
455,000
650,000
-0350,000
97,000
220,000
80,000
400,000
$ 50,000
$125,000
$ (20,000)
$ 60,000
$ (15,000)
The amount reported as income (loss) under the completed-contract method for 2013 is:
Project
A
B
C
D
E
$(15,000)
-0125,000
(20,000)
-0$ 90,000
The amount reported as income (loss) under the percentage-of-completion method for 2013 is:
Project
(b)
A
B
C
D
E
$(15,000)
15,000
125,000
(20,000)
48,000
$153,000
Construction in Process...................................................................................................
15,000
Construction Expenses....................................................................................................
Revenue from Long-term Contracts.................................................................
(c)
(d)
Billings
Cash collections
Accounts receivable
Billings on Construction in Process
$100,000
65,000
$ 35,000
100,000
Costs incurred
Loss reported
Construction in process
$123,000
(20,000)
$103,000
195,000
210,000
Estimated
Costs to
Complete
$ 63,000
242,000
-0$305,000
Each of the above contracts is with a different customer, and any work remaining at December 31, 2013 is expected to be
completed in 2014.
Instructions
Prepare a partial income statement and a partial balance sheet to indicate how the above contract information would be
reported. Evans uses the completed-contract method.
Solution 18-134
Evans Construction, Inc.
Income Statement
For the Year 2013
Revenue from long-term contracts (contract Z)
Cost of construction (contract Z)
Gross profit
Provision for loss (contract Y)*
$233,000
158,000
$ 75,000
12,000
$100,000
242,000
342,000
330,000
$ 12,000
Evans Construction, Inc.
Balance Sheet
As of 12/31/13
Current assets:
Accounts receivable ($523,000 $468,000)
Inventories
Construction in process (contract X)
Less: Billings
Unbilled contract costs
Current liabilities:
Billings ($115,000) in excess of contract costs ($100,000)
Estimated loss from long-term contracts
$ 55,000
$182,000
175,000
7,000
15,000
12,000
$38,000
20,000
50,000
90,000
27,800
4,600
$ 37,400
15,000
26,600
Common stock
Retained earnings
Installment sales
Cost of installment sales
Loss on repossessions
Operating expenses
117,000
10,000
125,000
85,000
2,600
13,000
$331,000
$331,000
Additional information:
2012 gross profit rate: 30%
Total cash receipts during 2014: $110,000
Merchandise sold in 2013 was repossessed in 2014 and the following entry was prepared:
Deferred Gross Profit2013.......................................................................................
Repossessed Merchandise............................................................................................
Loss on Repossessions.................................................................................................
Installment Accounts Receivable2013......................................................
2,800
4,600
2,600
10,000
Instructions
(a)
What is the gross profit rate for 2013? Show supporting computations.
(b)
What is the gross profit rate for 2014? Show supporting computations.
(c)
Of the total cash receipts in 2014, how much represents collections from installment sales of: (Show supporting
computations.)
(1)
2012?
(2)
2013?
(3)
2014?
(d)
What is the total realized gross profit in 2014? Show supporting computations.
Solution 18-135
(a)
$2,800
$10,000
= 28%
b)
Installment sales
Cost of sales
Gross profit
$125,000
85,000
$ 40,000
Gross profit
Installment sales
(c)
2012
2013
2014
(d)
$40,000
- = 32% gross profit rate
$125,000
$ 15,000
30%
$ 50,000
$ 50,000
(20,000)
$ 30,000
$ 26,600
28%
$95,000
$95,000
(50,000)
$ 45,000
$125,000
(90,000)
$ 35,000
$ 9,000
12,600
11,200
$32,800