ACC 414 Study Guide - Final Guide: Gross Profit, Income Statement

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28 May 2016

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3 criteria must be fulfilled: earnings process is substantially complete, measurability is reasonably assured, collectability is reasonably assured. Journal entries (1) to record cost of construction (2) to record progress billings. Construction expense (3) to record collections (4) to recognized revenue (gross profit) (5) to record completion of the contract. If construction in process > billings: then put construction in process as asset (inventory) If billings > construction in process: then put billings as liability (unearned) Do not record revenue or gross profit until the contract is complete. (1), (2) & (3) are the same as percentage completion (4) to record revenue (5) to record costs. To record cost of goods sold on installment sales in 2004. To defer gross profit recognition for unrealized gross profit. Calculation: [current rate*(current sales current cash receipts)] To record cost of goods sold in 2005. Realized gross profit prior years sales (income statement) Deferred (unrealized) gross profit current year (income statement)

Related Questions

	2018		2019		2020
Cost incurred during the year	$	2,400,000	$	3,600,000	$	2,200,000
Estimated costs to complete as of year-end		5,600,000		2,000,000		0
Billings during the year		2,000,000		4,000,000		4,000,000
Cash collections during the year		1,800,000		3,600,000		4,600,000

Westgate recognizes revenue over time according to percentage of completion.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

	2018		2019		2020
Cost incurred during the year	$	2,400,000	$	3,800,000	$	3,200,000
Estimated costs to complete as of year-end		5,600,000		3,100,000		0

5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

	2018		2019		2020
Cost incurred during the year	$	2,400,000	$	3,800,000	$	3,900,000
Estimated costs to complete as of year-end		5,600,000		4,100,000		0

amaranthgnu452

In 2018, the Westgate Construction Company entered into acontract to construct a road for Santa Clara County for$10,000,000. The road was completed in 2020. Information related tothe contract is as follows: 2018 2019 2020 Cost incurred during theyear $ 2,490,000 $ 3,984,000 $ 2,008,600 Estimated costs tocomplete as of year-end 5,810,000 1,826,000 0 Billings during theyear 2,030,000 4,444,000 3,526,000 Cash collections during the year1,815,000 3,900,000 4,285,000 Westgate recognizes revenue over timeaccording to percentage of completion. rev: 09_15_2017_QC_CS-99734Required: 1. Calculate the amount of revenue and gross profit(loss) to be recognized in each of the three years. (Do not roundintermediate calculations. Loss amounts should be indicated with aminus sign.)

fuchsiamule381

On January 11, 2013, ProsCo signed a $2.60 million contract to construct an office and warehouse for a small wholesale company. The project was originally expected to be completed in two years, but difficulties in hiring a sufficient pool of skilled workers extended the completion date by an extra year. As well, significant increases in the price of steel in the second year resulted in cost overruns on the project. ProsCo was able to negotiate a partial recovery of these costs, and the total contract value was adjusted to $3.20 million in the second year. Additional information from the project is as follows:

	2013	2014	2015
Total contract value	$2,600,00	$3,200,000	$3,200,000
Accumulated costs to date	528,000	2,160,000	3,700,000
Estimated costs to complete the project	1,672,000	1,440,000	0
Customer billings to date	300,000	2,000,000	3,200,000
Cash collected to date	100,000	2,000,000	3,200,000

(A) Calculate the amount of gross profit to be recognized each year using the percentage-of-completion method.

	2013	2014	2015
Gross profit (loss) for the year

(B) Prepare all the required journal entries for the year ended December 31, 2014.

Assume that the increase in material costs has created significant uncertainty for the contract.

(C) Using the zero-profit method (IFRS), determine the amount of revenue and expense to report each year.

	2013	2014	2015
Revenue
Expense

(D) Using the completed-contract method (ASPE), determine the amount of revenue and expense to report each year.

	2013	2014	2015
Revenue
Expense

crimsondinosaur336

ACC 414 Study Guide - Final Guide: Gross Profit, Income Statement

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