Business Assignment- Construction Company
Question:
- Cummings is a construction company and uses the percentage of completion method. In 2013 they signed a contract to complete a job for $2,000,000. The estimated costs to complete were $1,800,000. At the end of 2013, costs of $540,000 were incurred and the estimated costs to complete are $1,260,000. In 2014 additional costs of $940,000 were incurred and costs to complete were $370,000. How much profit is shown in 2013 and in 2014?
a) $60,000 in 2013, $100,000 in 2014
b) $60,000 in 2013, $60,000 in 2014
c) $0 in 2013 and $0 in 2014
d) $60,000 in 2013 and $47,633
2. Jordan also uses the percentage of completion method. In 2013, they enter into a contract with a sales price of $900,000. The estimated costs are $840,000. In 2013, they incur costs of $435,000 and additional costs of $435,000 are anticipated. In 2014, costs of $301,000 and additional costs are estimated at $184,000. What profit is shown in 2013 and 2014?
a) $15,000 and $20,000 loss
b) $15,000 and $35,000 loss
c) $15,000 and $31,000 loss
d) $15,000 and no profit or loss
3. In 2014, Cummings shows Partial Billings of $360,000 and CIP of $420,000. How would this be shown on the balance sheet?
a) As a current asset of $420,000 and a current liability of $360,000
b) Netted in the current asset section with CIP minus Partial Billings
c) Netted in the current liability section with Partial Billings minus CIP
d) $420,000 in Plant & Equipment and $360,000 in current liability section - Olsen sells merchandise on the installment basis and uses the installment basis. Sales in 2012 totaled $100,000, in 2013 they were $120,000 and in 2014 $150,000. The cost of installment sales was $70,000 in 2012, $90,000 in 2013, and $96,000 in 2014. Collections in 2014 were: $30,000 from 2012, $50,000 from 2013 and $60,000 from 2014. How much profit would be reported in 2014 using the installment sales method?
a) $38,100
b) $54,000
c) $35,800
d) $42,000
5. Refer to question 4. Merchandise from 2013 was repossessed in 2014. The original cost was $1,500 and thus far $900 has been collected. The merchandise is worth $500. What effect will this transaction have on income in 2014?
a) A loss of $600
b) A loss of $100
c) A gain of $500
d) A gain of $50
6. A company is preparing a cash flow statement and is using the indirect method for finding cash from operations. One of the transactions involves the sale of surplus equipment that cost $22,000, had accumulated depreciation of $14,500 and was sold for $8,000. On the cash flow statement, how should this be shown?
a) As an $8,000 cash inflow from operations
b) As an $8,000 inflow from investing activities but the gain of $500 must be subtracted from net income to arrive at cash from operationsc) As a $7,500 cash inflow from Investing activities
d) As an $8,000 inflow from financing activities but the gain of $500 must be subtracted from net income to arrive at cash from operations
7. Morrow uses Dollar LIFO. Inventory at year end prices are as follow:
2010 = $90,000. 2011 = $98,700. 2012 = $113,360. 2013 = $115,000. 2014 = $132,000. 2015 = $135,000
Price Indexes are: 2010 = 100. 2011 = 1.05. 2012 = 1.09 2013= 1.15 2014= 1.20 2015 = 1.25
What is the ending inventory for 2015 using dollar LIFO?
a) $117,540
b) $ 130,500
c) $121,540
d) $132,000
8. Izzo uses the direct method for reporting cash from operating activities. Credit sales for 2014 totaled $180,000. Accounts Receivable had a balance of $34,000 on 1-1-2014 and of $39,200 on 12-31-2014. How much cash was collected from customers in 2014?
a) $180,000
b) $185,200
c) $174,800
d) $219,200
9. Adams reports cost of goods sold on the income statement of $250,000. The beginning inventory was $36,000 and the ending was $31,000. Trade Accounts Payable were $22,000 on 1-1-2014 and $25,300 on 12-31-2014. How much cash was paid to suppliers in 2014?
a) $258,300
b) $241,700
c) $248,800
d) $251,700
10. Calvin shows insurance expense of $12,800 on their income statement. The Prepaid Insurance account had a balance of $5,200 on 1-1-2014 and on 12-31-2014 the balance was $6,000. How much cash was paid for insurance during 2014?
a) $12,800
b) $6,000
c) $12,000
d) $13,600
11. Salaries expense in 2014 was $174,000 and Salaries Payable totaled $3,200 on 1-1-2014 and $4,500 on 12-31-2014. How much was paid for salaries in 2014?
a) $174,000
b) $178,500
c) $175,300
d) $172,700
12. Which of the following inventory methods provides the same answer whether a company uses the periodic or perpetual inventory methods?
a) FIFO
b) LIFO
c) Average Cost
Use the following information to answer questions 13-15.
Korah purchased 80 bonds with a par value of $1,000 each and paying interest at 4% A.P.R. They were originally issued on 3-1-2008 and have a 20- year life and pay interest on 9-1 and 3
The bonds were sold at 97% and purchased on 11-1-2014.
13. Assume that the bonds were classified as held to maturity. How much interest income would be shown on 12-31-2014?
a) $533
b) $592
c) $472
d) $296
14. Assume the bonds are available for sale, how much interest income would be shown on 12-31-2014?
a) $533
b) $592
c) $472
d) $267
15. Again assume the bonds are available for sale. The market price of the bonds is 99%. What is the consequence of this?
a) An unrealized gain of $1,600 on the income statement
b) An unrealized gain of $1,600 on the comprehensive income statement
c) A realized gain of $1,600 on the income statement
d) No consequence
16. Where are unrealized gains and losses on available for sale securities closed at year- end?
a) To retained earnings
b) To an accumulated other comprehensive income or loss account in the owner’s equity section
c) To paid in capital
- d) They are not closed
The following information is to be used to answer questions 17 and 18.
Marketable Equity Securities 12-31-2014 at cost = $45,000
Marketable Equity Securities 12-31-2014 at market value = $48,000
During 2015, securities that cost $5,000 were sold for $5,900.
Marketable Equity Securities 12-31-2015 at cost = $51,000
Marketable Equity Securities 12-31-2015 at market value = $50,000
The securities are classified as trading. What will be shown on the financial statements in 2014?
a) An unrealized gain on the income statement of $3,000 and in the current asset section Marketable Securities at cost of $45,000 plus a valuation account of $3,000.
b) An unrealized gain of $3,000 on the comprehensive income statement and in the current asset section Marketable Securities at cost of $45,000 plus a valuation account of $3,000
c) No gain or loss and marketable securities in the current asset section at cost of $45,000
d) A realized gain of $3,000 and in the current asset section Marketable Equity Securities at cost of $45,000 plus a valuation allowance of $3,000
18. What is reported in 2015 on the income statement and/or the comprehensive income statement assuming the stock is trading?
a) A realized gain of $900 on the income statement and a $1,000 loss on the income statement
b) A realized gain of $900 on the income statement and an unrealized loss of $1,000 on the comprehensive income statement
c) A $900 realized gain and a $4,000 unrealized loss all on the income statement
d) Only the $900 realized loss on the income statement
19. Meacham had a fire on 3-5-2014 that destroyed their entire inventory. The physical inventory last year showed $68,000 and from 1-1 until 3-5 there was another $190,000 of net purchases made. Sales during that period totaled $310,000 and the average gross profit % for the last several years had been 30%. What is the estimated loss due to the fire?
a) $41,000
b) $68,000
c) $34,000
d) None of the above
20. Evans made an installment sale on 2-1-2012 totaling $200,000. The merchandise cost $140,000. Ignore interest. Collections totaled $40,000 in 2012, $80,000 in 2013 and $30,000 in 2014. Using the cost recovery method, how much profit would be shown in 2012, 2013 and 2014?
a) $12,000, $24,000 and $9,000
b) $0, $0 and $10,000
c) $0, $0 and $3,000
d) $0, $0, and $0
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