Student Name: Instructor Class: McGraw-Hill/Irwin Problem 05-02 Requirement 1: 2011 Cost recovery %: $180,000 $300,000 2012 Cost recovery %: $280,000 $400,000 2011 Gross Profit: Cash collection from 2011 sales 2012 Gross Profit: Cash collection from 2011 sales Cash collection from 2012 sales Total 2012 gross profit = = $100,000 $150,000 X X 40% 30% = = = $120,000 X 40% =

=

60%

Gross profit % =

=

70%

Gross profit % =

Requirement 2: Date Account 2011 To record installment sales Installment receivables Inventory Deferred gross profit 2011 To record cash collections from installment sales Cash Installment receivables 2011 To recognize gross profit from installment sales Deferred gross profit Realized gross profit 2012 To record installment sales Installment receivables Inventory Deferred gross profit 2012 To record cash collections from installment sales Cash Installment receivables Debit 300,000 CreditCorrect!

180,000 120,000

120,000 120,000 Correct!

48,000 48,000 Correct!

400,000

Correct!

280,000 120,000

250,000 250,000 Correct!

2012 To recognize gross profit from installment sales Deferred gross profit Realized gross profit

85,000 85,000 Correct!

Requirement 3: Date 2011 2011 sales 2012 2011 sales 2012 sales 2012 totals Cash Collected Cost Recovery

$120,000

$120,000

$100,000 150,000 $250,000

$60,000 150,000 $210,000

Date Account 2011 To record installment sales Installment receivables Inventory Deferred gross profit 2011 To record cash collections from installment sales Cash Installment receivables 2012 To record installment sales Installment receivables Inventory Deferred gross profit 2012 To record cash collections from installment sales Cash Installment receivables 2012 To recognize gross profit from installment sales Deferred gross profit Realized gross profit

Debit 300,000

CreditCorrect!

180,000 120,000

120,000 120,000 Correct!

400,000

Correct!

280,000 120,000

250,000 250,000 Correct!

40,000 40,000 Correct!

Instructor McGraw-Hill/Irwin Problem 05-02

40%

Correct!

30%

Correct!

$48,000

Correct!

$40,000 45,000 $85,000

Correct!

Correct!

Correct!

Correct!

Correct!

Gross Profit

0

Correct!

$40,000 0 $40,000

Correct!

Correct!

Correct!

Correct!

Given Data P05-02: AJAX COMPANY Installment Sales Sales Cost of sales Customer collections on: 2011 sales 2012 sales 2011 300,000 180,000 120,0002012 400,000 280,000 100,000 150,000

$

$

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 05-03 Requirement 1: SILVA COMPANY Gross Profit Recognized Total profit Installment sales method: Gross profit % 8/31/2011 100,000 200,000 40,000 8/31/2012 100,000 40,000 $ 200,000 40% 8/31/2013 100,000 40,000 8/31/2014 100,000 40,000 100,000 8/31/2015 100,000 40,000 100,000

Cash collections Point of delivery method Installment sales method Cost recovery method

$ $ $ $

$ $ $ $

$ $ $ $

$ $ $ $

$ $ $ $

Requirement 2: SILVA COMPANY General Journal

Account Installment receivable Sales revenue Cost of goods sold InventoryTo record sale on 8/31/11.

Point of Delivery Debit Credit 500,000 500,000 300,000 300,000

Installment Sales Debit Credit

Cost Recovery Debit Credit

Installment receivable Inventory Deferred gross profitTo record sale on 8/31/11.

500,000 300,000 200,000

500,000 300,000 200,000

Cash Installment receivedEntry made each Aug. 31.

100,000 100,000

100,000 100,000

100,000 100,000

Deferred gross profit Realized gross profitEntry made each Aug. 31.

40,000 40,000

Deferred gross profit Realized gross profitEntry made 8/31/14 & 8/31/15.

100,000 100,000

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 05-03 Requirement 3: SILVA COMPANY Partial Balance Sheet Point of Delivery December 31, 2011 Assets Installment receivable Less deferred gross profit Installment receivables, net December 31, 2012 Assets Installment receivable Less deferred gross profit Installment receivables, net Installment Sales Cost Recovery

400,000

400,000 160,000 240,000

400,000 200,000 200,000

300,000

300,000 120,000 180,000

300,000 200,000 100,000

Given Data P05-03: SILVA COMPANY Merchandise sold Down payment Annual installments (4) Book value of merchandise $ $ $ $ 500,000 100,000 100,000 300,000

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 05-05WESTGATE CONSTRUCTION COMPANY Requirement 1: Gross profit to be recognized Contract price Actual costs to date Estimated costs to complete Total estimated costs Estimated gross profit (loss)

$

$

2011 10,000,000 2,400,000 5,600,000 8,000,000 2,000,000 Correct!

$

$

2012 10,000,000 6,000,000 2,000,000 8,000,000 2,000,000 Correct! 2012 900,000 Correct!

$

$

2013 10,000,000 8,200,000 8,200,000 1,800,000 Correct! 2013 300,000 Correct!

Gross profit (loss) recognition:

$

2011 600,000 Correct!

$

$

Requirement 2: WESTGATE CONSTRUCTION COMPANY General Journal 2011 Debit 2,400,000 2012 Debit 3,600,000 2013 Debit 2,200,000

AccountConstruction in progress Various accounts To record construction costs. Accounts receivable Billings on construction contract To record progress billings. Cash Accounts receivable To record cash collections Construction in progress Cost of construction Rev. from long-term contracts To record gross profit.

Credit 2,400,000

Credit 3,600,000

Credit 2,200,000

2,000,000 2,000,000

4,000,000 4,000,000

4,000,000 4,000,000

1,800,000 1,800,000

3,600,000 3,600,000

4,600,000 4,600,000

600,000 2,400,000 3,000,000

900,000 3,600,000 4,500,000

300,000 2,200,000 2,500,000

Requirement 3: WESTGATE CONSTRUCTION COMPANY Partial Balance Sheet 2011 Current assets: Accounts receivable Construction in progress Less: Billings Costs and profit in excess of billings $ $ 3,000,000 (2,000,000) $ 1,000,000 200,000 $ 7,500,000 (6,000,000) $ 1,500,000 2012 $ 600,000

Student Name: Instructor Class: McGraw-Hill/Irwin Problem 05-05Requirement 4: Costs incurred during year Estimated cost to complete as of year-end $ 2011 2,400,000 5,600,000 2011 10,000,000 2,400,000 5,600,000 8,000,000 2,000,000 Correct! Gross profit (loss) recognition: 2011 600,000 Correct! $ 2012 3,800,000 3,100,000 2012 10,000,000 6,200,000 3,100,000 9,300,000 700,000 Correct! 2012 (133,333) $ Correct! $ 2013 3,200,000 2013 10,000,000 9,400,000 9,400,000 600,000 Correct! 2013 133,333 Correct!

Contract price Actual costs to date Estimated costs to complete Total estimated costs Estimated gross profit (loss)

$

$

$

$

$

$

$

$

Requirement 5: Costs incurred during year Estimated cost to complete as of year-end $ 2011 2,400,000 5,600,000 2011 10,000,000 2,400,000 5,600,000 8,000,000 2,000,000 Correct! Gross profit (loss) recognition: 2011 600,000 Correct! $ 2012 3,800,000 4,100,000 2012 10,000,000 $ 6,200,000 4,100,000 10,300,000 (300,000) $ Correct! 2012 (900,000) $ Correct! $ 2013 3,900,000 2013 10,000,000 10,100,000 10,100,000 (100,000) Correct! 2013 200,000 Correct!

Contract price Actual costs to date Estimated costs to complete Total estimated costs Estimated gross profit (loss)

$

$

$

$

$

$

Given Data P5-05: WESTGATE CONSTRUCTION COMPANY Contract information: Contract amount

$10,000,000 2011 $ 2,400,000 5,600,000 2,000,000 1,800,000 2012 $ 3,600,000 2,000,000 4,000,000 3,600,000 2013 $ 2,200,000 4,000,000 4,600,000

Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year

Costs incurred and costs to complete information (Part 4): 2011 $ 2,400,000 5,600,000 2012 $ 3,800,000 3,100,000 2013 $ 3,200,000 -

Costs incurred during the year Estimated costs to complete as of year-end

Costs incurred and costs to complete information (Part 5): 2011 $ 2,400,000 5,600,000 2012 $ 3,800,000 4,100,000 2013 $ 3,900,000 -

Costs incurred during the year Estimated costs to complete as of year-end