Income Measurement and Profitability Analysis

Chapter 5 Income Measurement and Profitability Analysis exercises Exercise 51 requisite 1 Alpine West should make out receipts over the ski season on an anticipated usage basis, in this case equally throughout the season. The fact that the $450 price is nonrefundable is not pertinent to the tax recognition decision. receipts should be agnised as it is earned, in this case as the services are provided during the ski season. indispensability 2 November 6, 2013 immediate payment450 Unearned revenue450 To inscribe the cash collection December 31, 2013Unearned revenue ($450 x 1/5)90 Revenue90 To recognize revenue earned in December (no revenue earned in November, as season starts on December 1). necessary 3 $90 is included in revenue in the 2013 income statement. The $360 rest balance in unearned revenue is included in the original liability section of the 2013 balance sheet. Exercise 53 exigency 1 2013 personify recovery % $234,000 = 65% ( tax revenue clear % = 35%) $360, 000 2014 personify recovery % $245,000 = 70% ( crude(a) net put on % = 30%) $350,000 2013 revenue kale hard cash collection from 2013 raw gross gross sales of $150,000 x 35%=$52,500 2014 gross cyberspace bills collection from 2013 sales of $100,000 x 35%=$ 35,000 + exchange collection from 2014 sales of $120,000 x 30%= 36,000 Total 2014 gross profit $71,000 prerequisite 2 2013 deferred gross profit balance 2013 initial gross profit ($360,000 234,000)$126,000 less(prenominal) piggish profit recognise in 2013 (52,500) Balance in deferred gross profit account$73,500 2014 deferred gross profit balance 2013 initial gross profit ($360,000 234,000)$ 126,000 Less glaring profit recognized in 2013 (52,500) realize profit recognized in 2014(35,000) 2014 initial gross profit ($350,000 245,000)105,000 Less Gross profit recognized in 2014 (36,000) Balance in deferred gross profit account$107,500 Exercise 54 2013 episode receivables360,000 Inventory234,000 Deferred gross profi t126,000 To say installment sales 2013 Cash150,000 Installment receivables150,000 To phonograph marking cash collections from installment sales 2013 Deferred gross profit52,500 Realized gross profit52,500 To recognize gross profit from installment sales 2014 Installment receivables350,000Inventory245,000 Deferred gross profit105,000 To phonograph record installment sales 2014 Cash220,000 Installment receivables220,000 To record cash collections from installment sales 2014 Deferred gross profit71,000 Realized 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 Total$180,000 Requirement 2 Cost recovery % $120,000 - = 40% (gross profit % = 60%) $300,000 Year Cash Collected 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 45,000 Totals $300,000 $120,0 00 $180,000 Requirement 3 Year Cash Collected 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 Contract price$2,000,000$2,000,000 Actual cost to participation 300,0001,875,000 Estimated cost to nab 1,200,000 0 Total estimated cost 1,500,0001,875,000 Gross profit (estimated in 2013)$ 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 Sheet At December 31, 2013 veritable assets Accounts receivable $ 130,000 Costs and profit ($400,000*) in dissipation of billings ($380,000) 20,000 * Costs ($300,000) + profit ($100,000) Exercise 511 (concluded) Requirement 4 Balance Sheet At December 31, 2013 Current assets Accounts receivable $ 130,000 Current liabilities Billings ($380,000) in overindulgence of costs ($300,000) $ 80,000 problems riddle 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 cash collections from installment sales Deferred gross profit48,000 Realized gross profit48,000 To recognize gross profit from installment sales Problem 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 Problem 55 Require ment 1 201320142015 Contract 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 tress in make 2,400,000 3,600,000 2,200,000 Various accounts 2,400,000 3,600,000 2,200,000 To record building 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 collections Const ruction 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 year$2,400,000$3,800,000$3,200,000 Estimated costs to complete as of year-end 5,600,000 3,100,000 201320142 015 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 (loss) 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