BE18-7 Turner, Inc. began work on a $7,000,000 contract in 2012 to construct an office building.

During 2012, Turner, Inc. incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2012, the estimated future costs to complete the project total $3,300,000. Prepare Turner’s 2012 journal entries using the percentage-of-completion method. Total Contract Total Estimated Cost Estimated (GP) from contract Under Percentage Method Percentage of completion Gross profit to be recognized Percentage of Completed Cost incurred Gross Profit to be recognized Total Charge to CIP (Construction in Progress) 1,700,000 1,040,000 2,740,000 0.5151515 1040000 7,000,000 5,000,000 (1700000+3300000) 2000000

Date 1 2 3 Date 1 2 3 Construction in Process Construction Expenses Construction In Progress

Activities Materials Cash and Payables A/R Billings on Construction in Process Cash Activities

Dr 1,700,000

Cr 1,700,000

1,200,000 1,200,000 960,000 Dr 680,000 1,700,000 2,380,000 Cr

Revenue from Long-Term Contracts

2012 110. 2012 Assets Current Assets Installment accounts Receivable due in 2011 Receivable due in 2012 Liabilities Current Liabilities Deferred 65. Instructions (a) Compute the amount of gross profit realized each year.800 Most of Grinkov’s sales are made on a 2-year installment basis.000 Deferred Gross Profit.000 2012 120.000. balance sheet.000 Installment Accounts Receivable.000 2014 40.000 175. The property had cost Wetzel $150.000 120. Grinkov Corporation had the following account balances.000 gross profit 65.000 E18-24 (Installment-Sales Method and Cost-Recovery Method) On January 1.000 in 2013. 2011 65. Partial Balance Sheet as of Dec 31.000 0 0 40. 2012. 2012.000 =(23.000 0 2013 90.400+41.000 40% .000 b Computation of gross profit realized for installment-sales method Gross profit rate =( 250. 2012.000-150.000 in 2012. $90.000 when it was purchased in 2010. 2012 41.000 30.BE18-14 At December 31. an in 2014. 2011 23.000 0 60. The 2011 accounts are collectible in 2013 2012 accounts are collectible in 2014.000) / 250.000 30. The note will be collected as follows: $120.800) 110. assuming Wetzel uses the cost-recovery (b) Compute the amount of gross profit realized each year.400 Deferred Gross Profit. Installment Accounts Receivable. assuming Wetzel uses the installment-s a Computation of gross profit realized for cost-recovery method Balance of Cash Original Gross Profit Unrecovered Year Received cost Realized Cost Beginning balance 150. Indicate how these accounts would reported in Grinkov’s December 31. Wetzel Compan property for $250.

000 =90000*40% $16.Gross profit realized for 2012 Gross profit realized for 2013 Gross profit realized for 2014 $48.000 =40000*40% .000 =120000*40% $36.

000.e building.700. and collected e project total mpletion method. =[1.000000] =7. During 000.000.000*34% .000/5.000)*2.

Wetzel Company sold $90.000 in 2013.800) 12.balances. .000 es the cost-recovery method. ese accounts would be collectible in 2013. and the 00+41. and $40. es the installment-sales method.

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