Chapter 18 – Group Work Solutions
1.
2012 / 2013 / 2014Contract Price / 7,200,000 / 7,200,000 / 7,200,000
Less Costs:
Costs To-Date / 1,450,000 / 4,200,000 / 6,000,000
Estimated Costs To Complete / 4,350,000 / 1,800,000
Total Costs / 5,800,000 / 6,000,000 / 6,000,000
Expected Total Gross Profit on Project / 1,400,000 / 1,200,000 / 1,200,000
% of Project Complete / 25% / 70% / 100%
(1,450/5,800) / (4,200/6,000) / (6,000/6,000)
a) and b)
c) 1,400,000 1,200,000 1,200,000
*.25 *.70 *1.0
Gross Profit Earned 2012 350,000 840,000 1,200,000
(350,000) (350,000)
Gross Profit Earned 2013 490,000 (490,000)
Gross Profit Earned 2014 360,000
d)Journal Entries 2012 DR CR
Construction In Progress1,450,000
Accounts Payable1,450,000
Accounts Receivable1,600,000
Billings In Progress1,600,000
Cash 900,000
Accounts Receivable 900,000
Construction Expenses1,450,000
Construction In Progress 350,000
Construction Revenue1,800,000
Journal Entries 2013 DR CR
Construction In Progress2,750,000
Accounts Payable2,750,000
Accounts Receivable3,300,000
Billings In Progress3,300,000
Cash 3,800,000
Accounts Receivable 3,800,000
Construction Expenses2,750,000
Construction In Progress 490,000
Construction Revenue3,240,000
Journal Entries 2014 DR CR
Construction In Progress1,800,000
Accounts Payable1,800,000
Accounts Receivable2,300,000
Billings In Progress2,300,000
Cash 2,400,000
Accounts Receivable2,400,000
Construction Expenses1,800,000
Construction In Progress 360,000
Construction Revenue2,160,000
Billings In Progress7,200,000
Construction In Progress7,200,000
e) Balance Sheet 2012
Current Assets:
Construction In Progress $1,800,000
Billings on Construction In Progress (1,600,000)
Construction Costs & GP in Excess of Billings $ 200,000
f) Balance Sheet 2013
Current Assets:
Construction In Progress $5,040,000
Billings on Construction In Progress (4,900,000)
Construction Costs & GP in Excess of Billings $ 140,000
2)a)Completed Contract – Journal Entries 2012
DR CR
Construction In Progress1,450,000
Accounts Payable1,450,000
Accounts Receivable1,600,000
Billings In Progress1,600,000
Cash 900,000
Accounts Receivable 900,000
b)Completed Contract – Journal Entries 2013
DR CR
Construction In Progress2,750,000
Accounts Payable2,750,000
Accounts Receivable3,300,000
Billings In Progress3,300,000
Cash 3,800,000
Accounts Receivable 3,800,000
c)Completed Contract – Journal Entries 2014
DR CR
Construction In Progress1,800,000
Accounts Payable1,800,000
Accounts Receivable2,300,000
Billings In Progress2,300,000
Cash 2,400,000
Accounts Receivable2,400,000
Billings In Progress7,200,000
Construction Revenues7,200,000
Construction Expenses6,000,000
Construction In Progress6,000,000
3.
2012 / 2013Contract Price / 7,200,000 / 7,200,000
Less Costs:
Costs To-Date / 1,450,000 / 4,200,000
Estimated Costs To Complete / 4,350,000 / 2,600,000
Total Costs / 5,800,000 / 6,800,000
Expected Total Gross Profit on Project / 1,400,000 / 400,000
% of Project Complete / 25% / 62%
(1,450/5,800) / (4,200/6,800)
1,400,000 / 400,000
*.25 / *.62
350,000 / 248,000
(350,000)
Current Period Loss to Report / (102,000)
DR CR
Construction Expenses2,750,000
Construction In Progress 102,000
Construction Revenues2,648,000
4.
2013 / 2014Installment Sales / 600,000 / 920,000
Cost of Sales / 480,000 / 690,000
Cash Collections 2013 / 150,000 / 180,000
Cash Collections 2014 / 230,000
a) Gross Profit on Installment Sales
Installment Sales / 600,000 / 920,000
Cost of Sales / 480,000 / 690,000
Gross Profit / 120,000 / 230,000
Gross Profit Margin % / 20% / 25%
b)Installment Sales - Journal Entries 2013 DR CR
Installment Accounts Receivable (2013) 600,000
Installment Sales Revenue600,000
Cost of Installment Sales480,000
Inventory480,000
Cash150,000
Installment Accounts Receivable (2013)150,000
Installment Sales Revenue600,000
Cost of Installment Sales480,000
Deferred Gross Profit (2013)120,000
Deferred Gross Profit (2013) 30,000
Realized Gross Profit 30,000
(150,000 * .20) = 30,000 Gross Profit Earned from 2013 Sales
c)Installment Sales - Journal Entries 2014 DR CR
Installment Accounts Receivable (2014)920,000
Installment Sales Revenue920,000
Cost of Installment Sales690,000
Inventory690,000
Cash410,000
Installment Accounts Receivable (2013)180,000
Installment Accounts Receivable (2014)230,000
Installment Sales Revenue920,000
Cost of Installment Sales690,000
Deferred Gross Profit (2014)230,000
Deferred Gross Profit (2013)36,000
Deferred Gross Profit (2014)57,500
Realized Gross Profit93,500
(180,000 * .20) = 36,000 Gross Profit Earned from 2013 Sales
(230,000 * .25) = 57,500 Gross Profit Earned from 2014 Sales
5)Defaults and Repossession
Original Selling Price / 65,000Down Payment (15% of Selling Price) / (9,750)
Remaining Balance / 55,250
Payment on 3 of 10 Equal Payments / (16,575)
Installment Accounts Receivable Balance / 38,675
Installment Accounts Receivable Balance / 38,675
Gross Profit Margin % on Install Sale / *.20
Deferred Gross Profit on Install Sale / 7,735
c)Installment Sales – Defaults and Repossessions DR CR
Equipment42,000
Deferred Gross Profit 7,735
Installment Accounts Receivable38,675
Gain on Repossession11,060
6)a)Cost Recovery Method - Journal Entries 2013 DR CR
Installment Accounts Receivable245,000
Installment Sales245,000
Cost Installment of Sales161,700
Inventory161,700
Cash160,000
Installment Accounts Receivable160,000
Installment Sales245,000
Cost of Installment Sales161,700
Deferred Gross Profit 83,300
Cost Recovery Method - Journal Entries 2014 DR CR
Cash85,000
Installment Accounts Receivable85,000
Deferred Gross Profit83,300
Realized Gross Profit83,300
b)Installment Sales Method - Journal Entries 2013 DR CR
Installment Accounts Receivable245,000
Installment Sales Revenue245,000
Cost of Installment Sales161,700
Inventory161,700
Cash160,000
Installment Accounts Receivable160,000
Installment Sales Revenue245,000
Cost of Installment161,700
Deferred Gross Profit 83,300
Deferred Gross Profit 54,400
Realized Gross Profit 54,400
83,300/245,000 = 34% Gross Profit Margin %
(160,000 * .34) = 54,400 Gross Profit to Realize on 2013 Cash Collections
Installment Sales Method- Journal Entries 2014 DR CR
Cash85,000
Installment Accounts Receivable85,000
Deferred Gross Profit28,900
Realized Gross Profit28,900
(85,000 * .34) = 28,900 Gross Profit to Realize on 2014 Cash Collections