Income Measurement and Profitability Analysis

Chapter 5 Income Measurement and lettuceability abridgment exercises feat 51 indispensableness 1 Alpine West should differentiate receipts over the ski indurate on an anticipated usage basis, in this case equally throughout the season. The detail that the $450 expenditure is nonrefundable is not relevant to the revenue learning decision. gross should be accepted as it is acquire, in this case as the services are provided during the ski season. necessity 2 November 6, 2013 immediate payment450 Un bring in revenue450 To temperament the capital gathering December 31, 2013Unearned revenue ($450 x 1/5)90 revenue90 To bed revenue earned in December (no revenue earned in November, as season starts on December 1). extremity 3 $90 is included in revenue in the 2013 income statement. The $360 remaining balance in honorary revenue is included in the real liability section of the 2013 balance sheet. Exercise 53 fate 1 2013 embody convalescence % $234,000 = 65% ( tax inco me dough % = 35%) $360,000 2014 cost recovery % $245,000 = 70% ( megascopic value % = 30%) $350,000 2013 hoggish breadCash ingathering from 2013 receipts realise revenue of $150,000 x 35%=$52,500 2014 gross boodle Cash gathering from 2013 gross gross revenue of $100,000 x 35%=$ 35,000 +Cash collection from 2014 sales of $120,000 x 30%= 36,000 full 2014 gross hit $71,000 Requirement 2 2013 deferred gross salary balance 2013 initial gross acquire ($360,000 234,000)$126,000 less(prenominal) Gross returns accepted in 2013 (52,500) offset in deferred gross bring in account$73,500 2014 deferred gross increase balance 2013 initial gross hit ($360,000 234,000)$ 126,000 Less Gross boodle acknowledge in 2013 (52,500)Gross mesh acknowledge in 2014(35,000) 2014 initial gross net income ($350,000 245,000)105,000 Less Gross loot recognized in 2014 (36,000) Balance in deferred gross profit account$107,500 Exercise 54 2013 episode receivables360,000 Inventory234,000 Deferred gross profit126,000 To commemorate sequence sales 2013 Cash150,000 installing receivables150,000 To phonograph enter specie collections from facility sales 2013 Deferred gross profit52,500 completed gross profit52,500 To recognize gross profit from installment sales 2014 Installment receivables350,000Inventory245,000 Deferred gross profit105,000 To record installment sales 2014 Cash220,000 Installment receivables220,000 To record hard currency collections from installment sales 2014 Deferred gross profit71,000 cognize gross profit71,000 To recognize gross profit from installment sales Exercise 55 Requirement 1 YearIncome recognized 2013$180,000 ($300,000 120,000) 2014- 0 2015- 0 2016 0 come up$180,000 Requirement 2 be recovery % $120,000 - = 40% (gross profit % = 60%) $300,000 Year Cash se find Cost Recovery(40%) Gross Profit(60%) 2013 $ 75,000 $ 30,000 $ 45,000 2014 75,000 30,000 45,000 2015 75,000 30,000 45,000 2016 75,000 30,000 45,00 0 joins $300,000 $120,000 $180,000 Requirement 3 Year Cash lay in Cost Recovery Gross Profit 2013 $ 75,000 $ 75,000 0 2014 75,000 45,000 $ 30,000 2015 75,000 0 75,000 2016 75,000 0 75,000 Totals $300,000 $120,000 $180,000 Exercise 511 Requirement 1 20132014 mash price$2,000,000$2,000,000 Actual cost to assignment 300,0001,875,000 Estimated be to complete 1,200,000 0 Total estimated be 1,500,0001,875,000 Gross profit (estimated in 2013)$ 500,000$ 125,000 Gross profit recognition 2013 $ 300,000 = 20% x $500,000 = $100,000 $1,500,000 2014$125,000 100,000 = $25,000 Requirement 2 2013$ 0 2014$125,000 Requirement 3 Balance tag At December 31, 2013 flowing assets Accounts receivable $ 130,000 Costs and profit ($400,000*) in overabundance of billings ($380,000) 20,000 * Costs ($300,000) + profit ($100,000) Exercise 511 (concluded) Requirement 4 Balance plane At December 31, 2013 Current as sets Accounts receivable $ 130,000 Current liabilities Billings ($380,000) in overmuchness of costs ($300,000) $ 80,000 problems fuss 52 Requirement 1 2013 cost recovery % $180,000 = 60% (gross profit % = 40%) $300,000 2014 cost recovery % $280,000 = 70% (gross profit % = 30%) $400,000 2013 gross profit Cash collection from 2013 sales = $120,000 x 40%= $48,000 2014 gross profit Cash collection from 2013 sales = $100,000 x 40%= $ 40,000 +Cash collection from 2014 sales = $150,000 x 30%= 45,000 Total 2014 gross profit $85,000 Requirement 2 013 Installment receivables300,000 Inventory180,000 Deferred gross profit120,000 To record installment sales Cash120,000 Installment receivables120,000 To record gold collections from installment sales Deferred gross profit48,000 agnise gross profit48,000 To recognize gross profit from installment sales business 52 (continued) 2014 Installment receivables400,000 Inventory280,000 Deferred gross profit120,000 To record installment sales Cash250,000 Installment receivables250,000 To record cash collections from installment sales Deferred gross profit85,000 Realized gross profit85,000 To recognize gross profit from installment sales Requirement 3 Date Cash Collected Cost Recovery Gross Profit 2013 2013 sales $120,000 $120,000 - 0 2014 2013 sales $100,000 $ 60,000 $40,000 2014 sales 150,000 150,000 0 2014 totals $250,000 $210,000 $40,000 Problem 52 (concluded) 2013 Installment receivables300,000 Inventory180,000 Deferred gross profit120,000 To record installment sales Cash120,000 Installment receivables120,000 To record cash collection from installment sales 2014 Installment receivables400,000 Inventory280,000 Deferred gross profit120,000 To record installment sales Cash250,000 Installment receivables250,000To record cash collection from installment sales Deferred gross profit40,000 Realized gross profit40,000 To recognize gross profit from installment sales Pr oblem 55 Requirement 1 201320142015 hack price$10,000,000$10,000,000$10,000,000 Actual costs to date 2,400,000 6,000,000 8,200,000 Estimated costs to complete 5,600,000 2,000,000 0 Total estimated costs 8,000,000 8,000,000 8,200,000 Estimated gross profit (loss) (actual in 2015)$ 2,000,000$ 2,000,000$ 1,800,000 Gross profit (loss) recognition 2013 $2,400,000 = 30. 0% x $2,000,000 = $600,000 $8,000,000 2014 $6,000,000 = 75. 0% x $2,000,000 = $1,500,000 600,000 = $900,000 $8,000,000 015$1,800,000 1,500,000 = $300,000 Problem 55 (continued) Requirement 2 2013 2014 2015 Construction in gird 2,400,000 3,600,000 2,200,000 versatile accounts 2,400,000 3,600,000 2,200,000 To record construction costs Accounts receivable 2,000,000 4,000,000 4,000,000 Billings on construction contract 2,000,000 4,000,000 4,000,000 To record progress billings Cash 1,800,000 3,600,000 4,600,000 Accounts receivable 1,800,000 3,600,000 4,600,000 To record cash co llections Construction in progress 600,000 900,000 300,000 (gross profit) Cost of construction 2,400,000 3,600,000 2,200,000 (cost incurred) Revenue from long-run contracts (1) 3,000,000 4,500,000 2,500,000 To record gross profit (1) Revenue recognized 2013 30% x $10,000,000 =$3,000,000 2014 75% x $10,000,000 =$7,500,000 Less Revenue recognized in 2013(3,000,000) Revenue recognized in 2014$4,500,000 2015 100% x $10,000,000 =$10,000,000 Less Revenue recognized in 2013 & 2014 (7,500,000) Revenue recognized in 2015$2,500,000 Problem 55 (continued) Requirement 3 Balance Sheet 2013 2014 Current assets Accounts receivable $ 200,000 $600,000 Construction in progress $3,000,000 $7,500,000 Less Billings (2,000,000) (6,000,000) Costs and profit in excess of billings 1,000,000 1,500,000 Requirement 4 01320142015 Costs incurred during the course$2,400,000$3,800,000$3,200,000 Estimated costs to complete as of closing 5, 600,000 3,100,000 201320142015 Contract price$10,000,000$10,000,000$10,000,000 Actual costs to date 2,400,000 6,200,000 9,400,000 Estimated costs to complete 5,600,000 3,100,000 0 Total estimated costs 8,000,000 9,300,000 9,400,000 Estimated gross profit (actual in 2015)$ 2,000,000$ 700,000$ 600,000 Problem 55 (concluded) Gross profit (loss) recognition 2013 $2,400,000 = 30. 0% x $2,000,000 = $600,000 $8,000,000 2014 $6,200,000 = 66. 6667% x $700,000 = $466,667 600,000 = $(133,333) $9,300,000 015$600,000 466,667 = $133,333 Requirement 5 201320142015 Costs incurred during the year$2,400,000$3,800,000$3,900,000 Estimated costs to complete as of year-end 5,600,000 4,100,000 201320142015 Contract price$10,000,000$10,000,000$10,000,000 Actual costs to date 2,400,000 6,200,00010,100,000 Estimated costs to complete 5,600,000 4,100,000 0 Total estimated costs 8,000,00010,300,00010,100,000 Estimated gross profit (loss) (actual in 2015)$ 2,000,000$ (300,000)$ (100,000) Gross profit (l oss) recognition 2013 $2,400,000 = 30. 0% x $2,000,000 = $600,000 $8,000,000 2014 $(300,000) 600,000 = $(900,000) 2015 $(100,000) (300,000) = $200,000