due by 01/20/13 at 6pm is only 7 short exercises

1.

Jansen Corporation shipped $18,400 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $1,760. Gooch Company paid $720 for local advertising, which is reimbursable from Jansen. By year-end, 63% of the merchandise had been sold for $21,900. Gooch notified Jansen, retained a 9% commission, and remitted the cash due to Jansen.
Prepare Jansen’s entry when the cash is received.
(Round answers to 0 decimal places, e.g. 1,52

5.

Credit account titles are automatically indented when amount is entered. Do not indent manually.

)

Account Titles and Explanation

Debit

Credit

(To record the cash remitted to Jansen.)

(To record the cost of inventory sold on consignment.)

Cash

=

[$21,900 – $720 – ($21,900

x

9%)]

=

$19,209

Inventory on Consignment

=

[63% x ($18,400 + $1,760)]

=

$12,701

2.

Turner, Inc. began work on a $7,723,000 contract in

2012

to construct an office building. During 2012, Turner, Inc. incurred costs of $1,702,140, billed its customers for $1,333,000, and collected $978,300. At December 31, 2012, the estimated future costs to complete the project total $3,455,860.
Prepare Turner’s 2012 journal entries using the percentage-of-completion method.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. For costs incurred use account Materials, Cash, Payables.)

Account Titles and Explanation

Debit

Credit

=

=

=

=

No.

(1)

(To record costs incurred.)

(2)

(To record billings.)

(3)

(To record collections.)

(4)

(To recognize revenue.)

Construction in Process

[($1,702,140 ÷ 5,158,000) x $2,565,000]

$846,450

Revenue from Long-Term Contracts

($7,723,000 x 33%)

$2,548,590

3.

Gordeeva Corporation began selling goods on the installment basis on January 1, 2012. During 2012, Gordeeva had installment sales of $110,000; cash collections of $67,100; cost of installment sales of $77,000.
Prepare the company’s entries to record 1) installment sales, 2) cash collected, 3) cost of installment sales, 4) deferral of gross profit, and 5) gross profit recognized, using the installment-sales method.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Account Titles and Explanation

Debit

Credit

1.
2.
3.

4.

5.

4.On June 3, Hunt Company sold to Ann Mount merchandise having a sales price of $11,000 with terms of 3/10, n/60, f.o.b. shipping point. An invoice totaling $120, terms n/30, was received by Mount on June 8 from the Olympic Transport Service for the freight cost. Upon receipt of the goods, June 5, Mount notified Hunt Company that merchandise costing $600 contained flaws that rendered it worthless. The same day, Hunt Company issued a credit memo covering the worthless merchandise and asked that it be returned at company expense. The freight on the returned merchandise was $28, paid by Hunt Company on June 7. On June 12, the company received a check for the balance due from Mount.
(a) Prepare journal entries for Hunt Company to record all the events noted above under each of the following bases.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

1. Sales and receivables are entered at gross selling price

Account Titles and Explanation

Debit

Credit

Date

6/3

6/5

6/7

6/12

2. Sales and receivables are entered net of cash discounts.

Date

Account Titles and Explanation

Debit

Credit

6/3

6/5

6/7

6/12

(b) Prepare the journal entry under basis (2), assuming that Ann Mount did not remit payment until August 5.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

6/12

2.

6/3

6/5

(3% x $10,400)

$312

(a) 1.

Sales Discounts

(3% x $10,400)

$312

Sales Revenue

[$11,000 – (3% x $11,000)]

$10,670

Accounts Receivable (Ann Mount)

[$600 – (3% x $600)]

$582

(b)

8/5

Sales Discounts Forfeited

5. (Recognition of Profit, Percentage-of-Completion)

In 2012 Gurney Construction Company agreed to construct an apartment building at a price of $1,

200,000

. The information relating to the costs and billings for this contract is shown below.

2012

2013

2014

Cost incurred to date

$280,000

$600,000

$785,000

Estimated costs yet to be incurred

520,000

200,000

-0-

Customer billings to date

150,000

500,000

1,200,000

Collection of billings to date

120,000

320,000

940,000

(a)

Assuming that the percentage-of-completion method is used.

(1)

Compute the amount of gross profit to be recognized in 2012 and 2013.

2012

2013

$

Gross profit recognized

$

(2)

Prepare journal entries for 2013.

Debit

Credit

Cash

Description/Account

Materials, Cash, Payables, etc.

Construction Expense

(b)

For 2013, show how the details related to this construction contract would be disclosed on the balance sheet and on the income statement.

$

$

$

Gross profit recognized

Income Statement (2013)

Balance Sheet (12/31/13)

(a) (1)

2012

2013

$

140,000

$

160,000

$280,000

520,000

$140,000

Contract price

$1,200,000

Costs:

Costs to date

$600,000

Estimated additional costs

200,000

800,000

Total estimated profit

400,000

Percentage completion to date

$160,000

Gross profit recognized in 2012

:

Contract price

$1,200,000

Costs:

Costs to date

Estimated additional costs

800,000

Total estimated profit

400,000

Percentage completion to date

($280,000/$800,000)

35%

Gross profit recognized in 2012

Gross profit recognized in 2013

:

($600,000/$800,000)

75%

Total Gross profit recognized

300,000

Less: Gross profit recognized in 2012

140,000
Gross profit recognized in 2013

(2)

Journal entries for 2013.

Description/Account

Debit

Credit

Materials, Cash, Payables, etc.

320,000

350,000

200,000

Construction Expense

320,000

Construction in Process ($600,000 – $280,000)

320,000

Accounts Receivable ($500,000 – $150,000)

350,000

Billings on Construction in Process

Cash ($320,000 – $120,000)

200,000

Accounts Receivable

Construction in Process

160,000

Revenues from Long-Term Contract

*480,000

* 1,200,000 × [($600,000 – $280,000) ÷ $800,000]

(b)

Income Statement (2013)

$160,000

Balance Sheet (12/31/13)

Gross profit on long-term construction project

Current assets:

Receivables- construction in process

* $180,000

Inventories-construction in process totaling

$400,000

(

$900,000

** less billings of $500,000)

* $180,000 = $500,000 – $320,000

$600,000

140,000

160,000

**

Total cost

to date

2012 Gross profit

2013 Gross profit

$900,000

6. (Gross Profit Calculations and Repossessed Merchandise)

Basler Corporation, which began business on January 1, 2012, appropriately uses the installment-sales method of accounting. The following data were obtained for the years 2012 and 2013.

300,000

400,000

2012 2013

Installment Sales

$750,000

$840,000

Cost of installment sales

510,000

588,000

General & administrative expenses

70,000

84,000

Cash collections on sales of 2012

310,000

Cash collections on sales of 2013

-0-

(a)

Compute the balance in the deferred gross profit accounts on December 31, 2012, and on December 31, 2013.

$

$

$

Deferred Gross Profit Account

2012 Installment Sales

2013 Installment Sales

Balance, December 31, 2012

Balance, December 31, 2013

(b)

A 2012 sale resulted in default in 2014. At the date of default, the balance on the installment receivable was $12,000, and the repossessed merchandise had a fair value of $8,000. Prepare the entry to record the repossession.
(List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Description/Account

Debit

Credit

(To record the default and the repossession of the merchandise)

Gross Profit Rate-

2012:

($750,000 – $510,000) ÷ $750,000 = 32%

Gross Profit Rate-

2013:

($840,000 – $588,000) ÷ $840,000 = 30%

(a)

Deferred Gross Profit Account

2012 Installment Sales

2013 Installment Sales

Balance, December 31, 2012

Balance, December 31, 2013

$140,800

$44,800

$132,000

Balance, December 31, 2012

Deferred Gross Profit Account-2012 Installment Sales

Gross profit on installment sales-2012 ($750,000 – $510,000)

$240,000

Less: Gross profit realized in 2012 ($310,000 × 32%)

(99,200)

Balance at 12/31/12

$140,800

Balance, December 31, 2013

Deferred Gross Profit Account-2012 Installment Sales

Balance at 12/31/12

$140,800

Less: Gross profit realized in 2013 on 2012 sales ($300,000 × 32%)

(96,000)

Balance at 12/31/13

$44,800

Balance at 12/31/13

Deferred Gross Profit Account-2013 Installment Sales

Gross profit on installment sales-2013 ($840,000 – $588,000)

$252,000

Less: Gross profit realized in 2013 on 2013 sales ($400,000 × 30%)

(120,000)

$132,000

(b)

Description/Account

Debit

Credit

(To record the default and the repossession of the merchandise)

Repossessed Merchandise

8,000

Deferred Gross Profit ($12,000 × 32%)

3,840

Loss on Repossession [$8,000 – ($12,000 – $3,840)]

160

Installment Accounts Receivable

12,000

7. Shanahan Construction Company has entered into a contract beginning January 1, 2012, to build a parking complex. It has been estimated that the complex will cost $

849,000

and will take 3 years to construct. The complex will be billed to the purchasing company at $

1,411,000

. The following data pertain to the construction period.

2012

2013

2014

Costs to date

1,411,000

$

382,050

$

602,790

$

862,000

Estimated costs to complete

466,950

246,210

–0–

Progress billings to date

328,000

529,000

1,411,000

Cash collected to date

305,000

497,000

(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.

Gross profit recognized in 2012

$

Gross profit recognized in 2013

$

$

Gross profit recognized in 2014

(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.

Gross profit recognized in 2012

$

Gross profit recognized in 2013

$

Gross profit recognized in 2014

$

(a)

2012

2013

2014

Contract price

$1,411,000

$1,411,000

Costs to date

466,950

246,210

849,000

862,000

$562,000

$1,411,000

Less estimated cost:

382,050 602,790 862,000

Estimated cost to complete

Estimated total cost

849,000

Estimated total gross profit

$562,000

$549,000

Gross profit recognized in—

$382,050

$562,000

=

$602,790

x

$562,000

=

$849,000

$549,000

2012: x

$

252,900

$849,000

2013:

$

399,020

Less 2012 recognized gross profit

252,900

Gross profit in 2013

$146,120

2014:

Estimated total gross profit for 2014

Less 2012–2013 recognized gross profit

399,020

Gross profit in 2014

$149,980

(b) In 2012 and 2013, no gross profit would be recognized.

$1,411,000

Gross profit recognized in 2014

Total billings

Total cost

(862,000

)
$549,000

Realized Gross Profit = (30% x $67,100) = $20,130

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