Homework For Accouting

18 Jun Homework For Accouting

Brief Exercise 18-3

Travel Inc. sells tickets for a Caribbean cruise to Carmel Company employees. The total cruise package costs Carmel $85,200 from ShipAway cruise liner. Travel Inc. receives a commission of 7% of the total price. Travel Inc. therefore remits $79,236 to ShipAway.

Prepare the entry to record the revenue recognized by Travel Inc. on this transaction. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation
Debit
Credit
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]

Brief Exercise 18-6

Telephone Sellers Inc. sells prepaid telephone cards to customers. Telephone Sellers then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines. Assume that Telephone Sellers sells $5,600 of prepaid cards in January 2014. It then pays TeleExpress based on usage, which turns out to be 49% in February, 31% in March, and 20% in April. The total payment by Telephone Sellers for TeleExpress lines over the 3 months is $3,100.

Indicate how much income Telephone Sellers should recognize in January, February, March, and April.

January income
$
[removed]
February income
$
[removed]
March income
$
[removed]
April income
$
[removed]

Brief Exercise 18-10

Guillen, Inc. began work on a $6,973,000 contract in 2014 to construct an office building. Guillen uses the completed-contract method. At December 31, 2014, the balances in certain accounts were Construction in Process $1,738,000; Accounts Receivable $368,000; and Billings on Construction in Process $1,163,000.

Indicate how these accounts would be reported in Guillen’s December 31, 2014, balance sheet.

Guillen, Inc.
Balance Sheet
December 31, 2014
[removed]

[removed]

$
[removed]

[removed]

[removed]

$
[removed]

[removed]
:
[removed]

[removed]

[removed]

$
[removed]

Exercise 18-1

Jupiter Company sells goods that have a cost of $490,000 to Danone Inc. for $740,000, with payment due in 1 year. The cash price for these goods is $604,000, with payment due in 30 days. If Danone paid immediately upon delivery, it would receive a cash discount of $7,000. Jupiter Company accepts a note receivable from Danone Inc. to pay for the goods.

(a) Prepare the journal entry to record this transaction at the date of sale. (Jupiter records sales discounts using the net method) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation
Debit
Credit
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]

(b) How much revenue should Jupiter report for the entire year?

Total revenue
$
[removed]

Exercise 18-8

Taylor Marina has 300 available slips that rent for $860 per season. Payments must be made in full at the start of the boating season, April 1, 2015. Slips for the next season may be reserved if paid for by December 31, 2014. Under a new policy, if payment is made by December 31, 2014, a 6% discount is allowed. The boating season ends October 31, and the marina has a December 31 year-end. To provide cash flow for major dock repairs, the marina operator is also offering a 21% discount to slip renters who pay for the 2016 season.

For the fiscal year ended December 31, 2014, all 300 slips were rented at full price. 203 slips were reserved and paid for the 2015 boating season, and 78 slips for the 2016 boating season were reserved and paid for.

(a)

Prepare the appropriate journal entries for fiscal 2014. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation
Debit
Credit
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record 2014 revenue.)

[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record 2015 revenue.)

[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record 2016 revenue.)

Exercise 18-12 (Part Level Submission)

During 2014, Nilsen Company started a construction job with a contract price of $1,784,000. The job was completed in 2016. The following information is available.

2014

2015

2016
Costs incurred to date $342,720 $871,260 $1,063,000
Estimated costs to complete 609,280 245,740 –0–
Billings to date 316,100 858,900 1,784,000
Collections to date 256,900 832,300 1,376,000

(a)

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Gross profit recognized in 2014
$
[removed]
Gross profit recognized in 2015
$
[removed]
Gross profit recognized in 2016
$
[removed]

(b)

Prepare all necessary journal entries for 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For costs incurred use account Materials, Cash, Payables.)

Account Titles and Explanation
Debit
Credit
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record cost of of construction.)

[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record progress billings.)

[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record collections.)

[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To recognize revenue.)

(c)

Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.

2014

2015

2016
Gross profit
$
[removed]

$
[removed]

$
[removed]

Problem 18-5

Reynolds Custom Builders (RCB) was established in 1987 by Avery Conway and initially built high-quality customized homes under contract with specific buyers. In the 2002s, Conway’s two sons joined the company and expanded RCB’s activities into the high-rise apartment and industrial plant markets. Upon the retirement of RCB’s long-time financial manager, Conway’s sons recently hired Ed Borke as controller for RCB. Borke, a former college friend of Conway’s sons, has been associated with a public accounting firm for the last 6 years.

Upon reviewing RCB’s accounting practices, Borke observed that RCB followed the completed-contract method of revenue recognition, a carryover from the years when individual home building was the majority of RCB’s operations. Several years ago, the predominant portion of RCB’s activities shifted to the high-rise and industrial building areas. From land acquisition to the completion of construction, most building contracts cover several years. Under the circumstances, Borke believes that RCB should follow the percentage-of-completion method of accounting. From a typical building contract, Borke developed the following data.

BLUESTEM TRACTOR PLANT
Contract price: $8,111,000

2014

2015

2016
Estimated costs $1,924,730 $2,853,910 $1,858,360
Progress billings 1,728,000 3,006,000 3,377,000
Cash collections 1,618,000 2,803,000 3,272,000

(b)

Using the data provided for the Bluestem Tractor Plant and assuming the percentage-of-completion method of revenue recognition is used, calculate RCB’s revenue and gross profit for 2014, 2015, and 2016, under each of the following circumstances.

(1) Assume that all costs are incurred, all billings to customers are made, and all collections from customers are received within 30 days of billing, as planned. (Round percentage of completion to 2 decimal places, e.g. 34.35% and final answers to 0 decimal places, e.g. 1,525.)

Revenue

Gross profit / (Loss)
2014
$
[removed]

$
[removed]
2015
$
[removed]

$
[removed]
2016
$
[removed]

$
[removed]

(2) Further assume that, as a result of unforeseen local ordinances and the fact that the building site was in a wetlands area, RCB experienced cost overruns of $898,000 in 2014 to bring the site into compliance with the ordinances and to overcome wetlands barriers to construction. (Round percentage of completion to 2 decimal places, e.g. 34.35% and final answers to 0 decimal places, e.g. 1,525.)

Revenue

Gross profit / (Loss)
2014
$
[removed]

$
[removed]
2015
$
[removed]

$
[removed]
2016
$
[removed]

$
[removed]

(3) Further assume that, in addition to the cost overruns of $898,000 for this contract incurred under part (b)(2), inflationary factors over and above those anticipated in the development of the original contract cost have caused an additional cost overrun of $1,082,000 in 2015. It is not anticipated that any cost overruns will occur in 2016. (Round percentage of completion to 2 decimal places, e.g. 34.35% and final answers to 0 decimal places, e.g. 1,525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Revenue

Gross profit / (Loss)
2014
$
[removed]

$
[removed]
2015
$
[removed]

$
[removed]
2016
$
[removed]

$
[removed]

IFRS Multiple Choice Question 06

The joint project of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) related to revenue recognition includes
Evaluating a “customer-consideration” model.
Eliminating inconsistencies in the existing conceptual guidance.
Establishing a single, comprehensive standard.

a. I and II only.
b. Neither I, II, nor III are currently included in the joint project of the FASB and IASB.
c. I, II, and III.
d. II and III only.

Answer:

IFRS Multiple Choice Question 07

Belgium Co. is constructing a tunnel for $600 million. Construction began in 2013 and is estimated to be completed in 2018. At December 31, 2015, Belgium has incurred costs totaling $267 million with $64 million of that incurred in 2015, $107 million in 2014, and the remainder during 2013. Belgium believes that it completed 30% of the tunnel during 2015, although that may change based on future activity. Belgium Co. uses IFRS for its accounting and regards its cost numbers as very uncertain. What amount of revenue should Belgium Co. recognize for the year ended December 31, 2016?

a. $64 million
b. $267 million
c. No revenue should be recognized until the contract is completed in 2018
d. $180 million

Answer:

IFRS Multiple Choice Question 08

Portugal, Inc. has the following amounts related to its activities for the year ended December 31, 2015:

Sales to customers $6,250,000
Gain on sale of equipment $ 450,000
Gain on sale of investments $ 950,000
Loss on sale of land $ 300,000

Portugal, Inc. uses IFRS for its external financial reporting. How much revenue should Portugal, Inc. report on its income statement for the year ended December 31, 2015?

a. $7,350,000
b. $6,250,000
c. $7,200,000
d. $7,650,000

Answer:

IFRS Multiple Choice Question 09

Under IFRS, the standard for revenue recognition states that the
Revenue be realized or realizable.
Economic benefits associated with the transaction will flow to the company selling the goods.
Costs must be capable of being reliably measured.

a. II and III only.
b. I, II, and III.
c. I and III only.
d. II only.

Answer:

IFRS Multiple Choice Question 10

IFRS for revenue recognition

a. bases revenue recognition on the concepts of “earned” and “realized or realizable”.
b. permits use of the completed-contract method when costs are difficult to estimate.
c. contains limited industry-specific guidance.
d. is enforced by an international enforcement body, the IASB, which is comparable to the U.S. SEC.

Answer: