LAGUNA COLLEGE OF BUSINESS AND ARTS

ACCTG306 ADVANCED ACCOUNTING PART 1

ASSIGNMENT ANSWER KEY

PROBLEM 1 - FRANCHISE ACCOUNTING

DOWN PAYMENT 1,050,000.00

NOTE (PV) 3,724,000.00
TOTAL REVENUE 4,774,000.00
LESS: DIRECT-IFF (1,645,000.00)
GROSS PROFIT 3,129,000.00
GROSS PROFIT - IFF
GROSS PROFIT - CFF
INTEREST INCOME
TOTAL INCOME
INDIRECT - IFF
DIRECT - CFF
INDIRECT - CFF
NET INCOME

PROBLEM 2 - LONGTERM CONSTRUCTION CONTRACT

CONSTRUCTION IN PROGRESS 2013 441,000.00

COST INCURRED 425,250.00
REALIZED GROSS PROFIT 15,750.00

GROSS PROFIT RATE 21%

REALIZED GROSS PROFIT 15,750.00

divided by: GROSS PROFIT RATE 21%
ESTIMATED GROSS PROFIT 75,000.00

CONTRACT PRICE 2,100,000.00

Less: ESTIMATED GROSS PROFIT (75,000.00)
TOTAL ESTIMATED COST 2,025,000.00

TOTAL ESTIMATED COST 2,025,000.00

Less: Cost Incurred 2013 (425,250.00)
ESTIMATED COST TO COMPLETE 2013 1,599,750.00

CONSTRUCTION IN PROGRESS 2013 441,000.00

EXCESS OF PROGRESS BILLINGS OVER CIP 84,000.00
PROGRESS BILLINGS 2013 525,000.00
ADDITIONAL BILLINGS (55% * 2,100,000) 1,155,000.00
PROGRESS BILLINGS 2014 1,680,000.00
EXCESS OF PROGRESS BILLINGS OVER CIP (330,750.00)
CONSTRUCTION IN PROGRESS 2014 1,349,250.00

CONSTRUCTION IN PROGRESS 2014 1,349,250.00

CONSTRUCTION IN PROGRESS 2013 (441,000.00)
COST INCURRED 2014 (969,000.00)
REALIZED GROSS LOSS 2014 (60,750.00)

PROBLEM 5 - INSTALLMENT SALES

FV OF TRADE-IN AFTER RECONDITION 112,140.00

LESS: RECONDITION COST (5,362.00)
20% GROSS PROFIT (112,140 * 20%) (22,428.00)
FV OF TRADE-IN PRIOR RECONDITION 84,350.00

ALLOWANCE FOR TRADE-IN 89,600.00

FV OF TRADE-IN PRIOR RECONDITION (84,350.00)
OVER ALLOWANCE 5,250.00

INSTALLMENT SALES 367,500.00

OVER ALLOWANCE (5,250.00)
ADJUSTED INSTALLMENT SALES 362,250.00
COST OF INSTALLMENT SALES (289,800.00)
DEFERRED GROSS PROFIT 72,450.00

GROSS PROFIT RATE 20%

INSTALLMENT SALES 367,500.00

LESS: ALLOWANCE FOR TRADE IN (89,600.00)
INSTALLMENT - ACCOUNTS RECEIVABLE 277,900.00
LESS: COLLECTION IN CASH (6 MONTHS - SEE BELOW) (166,740.00)
OUTSTANDING INSTALLMENT A/R 111,160.00
x COST RATE ( 1 - GP RATE) 80%
DEFERRED GROSS PROFIT FOR REPOSSESSED 88,928.00
LESS: RECOVERY (FV OF REPOSSESSED) (65,625.00)
LOSS (GAIN) ON REPOSSESSION 23,303.00

SALES OF REPOSSESSED 90,125.00

COST OF SALES (72,100.00)
REALIZED GROSS PROFIT ON SALE OF REPOSSESSED 18,025.00
COLLECTION:
IN KIND (OLD POKEDEX) 84,350.00
CASH (MAY, JUN, JUL, AUG, SEP, OCT) 166,740.00
TOTAL COLLECTION 251,090.00
x GROSS PROFIT RATE 20%
REALIZED GROSS PROFIT 50,218.00
LOSS ON REPOSSESSION (23,303.00)
REALIZED GROSS PROFIT ON SALE OF REPOSSESSED 18,025.00
NET INCOME 44,940.00
 1,050,000.00
* - *=
1,050,000.00
65.54% ** =

688,170.00
332,500.00 ** ***=
74,480.00 ***
1,095,150.00
(55,088.00) ID no.
(110,176.00) ID no. * 2
(63,000.00)
866,886.00

Note that the Construction in Progress is composed of cost incurred and Realized gross p

441,000 / 2,100,000 as alternative, when there is a realized gross profit, CIP/Contr

is the same as Actual Cost Incurred to Date/Total Estimated C

OR USE T-
ACCOUNT 12/31/2013
APPROACH ON
THE RIGHT
 OR USE T-
ACCOUNT
APPROACH ON
SQUEEZE
THE RIGHT 12/31/2014

72,450 / 362,250

65,625 + 6,475
6 * ((367,500 - 89,600) /10)
 ((5,950,000 - 1,050,000) / 4) * 3.04

6,650,000 * 5%
Continuing franchise fee

3,724,000 * 12% * 2/12

From July 1 to Aug 31 we only earned 2 months

On the assumption that the note payment is annually

however, those who assumed that the note payment
is monthly, it will be considered accordingly

st incurred and Realized gross profit/loss

a realized gross profit, CIP/Contract Price

urred to Date/Total Estimated Cost

CONSTRUCTION IN PROGRESS

441,000.00 ----------------------------------> 84,000 LIAB --------------------------

 969,000.00
60,750.00
1,349,250.00 <---------------------------------- 330,750 LIAB <------------------------
 PROGRESS BILLING

----------------------------------> 525,000.00 12/31/2013

 1,155,000.00 55% OF CONTRACT PRICE
<---------------------------------- 1,680,000.00 12/31/2014