AC302 Unit 2 Wiley Assignment

Exercise 18A-22
On January 1, 2014, Gordon Co. enters into a contract to sell a customer a wiring base and shelving unit that sits on the base in exchange for $3,180. The contract requires delivery of the base first but states that payment for the base will not be made until the shelving unit is delivered. Gordon identifies two performance obligations and allocates $1,272 of the transaction price to the wiring base and the remainder to the shelving unit. The cost of the wiring base is $742; the shelves have a cost of $339.



	 
 
 	Prepare the journal entry on January 1, 2014, for Gordon. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date	Account Titles and Explanation	Debit	Credit
January 1, 2014	  
  
  

	  
  
  




Show List of Accounts

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 	Prepare the journal entry on February 5, 2014, for Gordon when the wiring base is delivered to the customer. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date	Account Titles and Explanation	Debit	Credit
February 5, 2014	  
  
  

	  
  
  

	(To record the sale)		
February 5, 2014	  
  
  

	  
  
  

	(To record cost of goods sold)		



Show List of Accounts

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 	Prepare the journal entry on February 25, 2014, for Gordon when the shelving unit is delivered to the customer and Gordon receives full payment. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date	Account Titles and Explanation	Debit	Credit
February 25, 2014	  
  
  

	  
  
  

	  
  
  

	(To record the sale)		
February 25, 2014	  
  
  

	  
  
  

	(To record cost of goods sold)		





Exercise 18A-24
Rex- Reclaimers entered into a contract with Dan- Demolition to manage the processing of recycled materials on Dan- various demolition projects. Services for the 3-year contract include collecting, sorting, and transporting reclaimed materials to recycling centers or contractors who will reuse them. Rex- incurs selling commission costs of $2,140 to obtain the contract. Before performing the services, Rex- also designs and builds specialty receptacles and loading equipment that interfaces with Dan- demolition equipment at a cost of $28,890. These receptacles and equipment are retained by Rex-. Dan- promises to pay a fixed fee of $12,840 per year, payable every 6 months for the services under the contract. Rex- incurs the following costs: design services for the receptacles to interface with Dan- equipment $3,210, loading equipment controllers $6,420, and special testing and OSHA inspection fees $2,140 (some of Dan- projects are on government property).

(a)

Determine the costs that should be capitalized as part of Rex- Reclaimers revenue arrangement with Dan- Demolition.
 
	$  

 		
	$  

 		
	$  


(b)

Dan- also expects to incur general and administrative costs related to this contract, as well as costs of wasted materials and labor that likely cannot be factored into the contract price. Can these costs be capitalized?
 

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Problem 18A-10
Shanahan Construction Company has entered into a contract beginning January 1, 2014, to build a parking complex. It has been estimated that the complex will cost $540,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $810,000. The following data pertain to the construction period.
		2014		2015		2016
Costs to date		$243,000		$405,000		$549,000
Estimated costs to complete		297,000		135,000		0
Progress billings to date		243,000		495,000		810,000
Cash collected to date		216,000		450,000		810,000



	 
 
 	Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period. (Enter loss amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
		2014	2015	2016
Gross profit / (loss) that recognized		$  
$  
$  




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 	Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period. (Enter loss amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
	2014	2015	2016
Gross profit / (loss) that recognized	$  
$  
$  


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Problem 18A-11
On March 1, 2014, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $7,224,000. The building was completed by October 31, 2016. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2014, 2015, and 2016 are given below.
		2014		2015		2016
Contract costs incurred during the year		$2,476,800		$1,917,800		$1,883,400
Estimated costs to complete the contract at 12/31		3,027,200		1,883,400		0
Billings to Fabrik during the year		2,752,000		3,010,000		1,462,000



	 
 
 	Using the percentage-of-completion method, compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore income taxes.) (Enter loss amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
		2014		2015		2016	
Profit/ (Loss)		$  
	$  
	$  




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 	Using the completed-contract method, compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore incomes taxes.) (Enter loss amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
		2014		2015		2016	
Profit/ (Loss)		$  
	$  
	$  

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Complete the following problems in WileyPLUS. These problems will help you to understand how to recognize revenue for long-term contracts using the percentage-of-completion method and the completed-contract method and how to recognize losses on long-term contracts.

E18A-22
E18A-24
P18A-10
P18A-11