Acct 557 Week 1 Homework
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Acct 557 Week 1 Homework - Chpt. 18
Problem 1
a).
Point of Sale - Point of sale method recognizes revenue when the earnings process is compl
Completed Contract Method - Completion-of-Production recognizes revenue only when the
Percentage-of-Completion - Percentage of completion method's revenue is recognized whe
Installment Sales - Installment sales method is used when revenue and expenses are recog
b).
Pat's Electronics Division
Revenue for 2012
2,400,000
Pickle Construction Division
Contract amount
Costs
Actual costs to date
Estimate cost to complete
Total costs
Estimated Profit
Percentage completed
Revenue for 2012
60,000,000
14,100,000
36,360,000
50,500,000
9,500,000
28%
Peace Book Distribution
Revenue for 2012
Total sales
Sales Return
Net sales
7,200,000
9,000,000
1,800,000
7,200,000
Problem 2
Curiosity Company
a).
Installment Accounts Receivable
Installment Sales Receivable
Cash
Installment Accounts Receivable
Cost of Installment Sales
Inventory
Repossessed Merchandise
26,800
Deferred Gross Profit
13,000
Loss on Repossession
12,200
Installment Accounts Receivable
Rate of Gross Profit
25%*52,000=
[26,800-(52,000-13,000)]
200,000
800,000
13,000
Installment Sales Revenue
Cost of Installment Sales
Deferred Gross Profit
b).
Deferred Gross Profit
Realized Gross Profit
80,000
he earnings process is complete and an exchange transaction has taken place. This can be when serv
gnizes revenue only when the project is complete and the contract is completed. This method is used p
d's revenue is recognized when part of the project is completed. This method is not in accordance with
enue and expenses are recognized at the time of cash collection rather than at the time of sale. Install
Pat's Electronic's uses the point of sale method for revenue recognition
$16,800,000
800,000
800,000
320,000
320,000
600,000
600,000
52,000
25%
800,000
600,000
200,000
80,000
can be when services are rendered and billable, the date goods are delivered, as time passes, or whe
s method is used primarily with short-term contracts, or with long-term contracts when there is consid
n accordance with GAAP.
ime of sale. Installment sales method is accordance with GAAP.
as time passes, or when title passes. This method most closely follows the accrual accounting method
s when there is considerable difficulty in estimating the costs remaining to complete a project. The adv
al accounting method and is in accordance with GAAP, Generally Accepted Accounting Principles.
plete a project. The advantage to this method is when the contract extends over more than one accoun
ounting Principles.
r more than one accounting period, current performance on the project is not recognized and earnings
cognized and earnings are distorte. Completed contract method is acceptable according to GAAP only i
ccording to GAAP only in
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