Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 05-02
Requirement 1:
2011 Cost recovery %:
$180,000
$300,000

60%

Gross profit % =

70%

Gross profit % =

$120,000

40%

=
=

$100,000
$150,000

X
X

40%
30%

=
=

Debit

Credit

300,000

Correct!

2012 Cost recovery %:

$280,000
$400,000
2011 Gross Profit:
Cash collection from 2011 sales
2012 Gross Profit:
Cash collection from 2011 sales
Cash collection from 2012 sales
Total 2012 gross profit

Requirement 2:
Date Account
2011 To record installment sales
Installment receivables
Inventory
Deferred gross profit
2011 To record cash collections from installment sales
Cash
Installment receivables
2011 To recognize gross profit from installment sales
Deferred gross profit
Realized gross profit
2012 To record installment sales
Installment receivables
Inventory
Deferred gross profit
2012 To record cash collections from installment sales
Cash
Installment receivables

180,000
120,000

120,000
120,000 Correct!

48,000
48,000 Correct!

400,000

Correct!

280,000
120,000

250,000
250,000 Correct!

2012 To recognize gross profit from installment sales

Deferred gross profit
Realized gross profit

85,000
85,000 Correct!

Requirement 3:
Date

Cash Collected

Cost Recovery

2011
2011 sales

$120,000

$120,000

2012
2011 sales
2012 sales
2012 totals

$100,000
150,000
$250,000

$60,000
150,000
$210,000

Date Account
2011 To record installment sales
Installment receivables
Inventory
Deferred gross profit
2011 To record cash collections from installment sales
Cash
Installment receivables
2012 To record installment sales
Installment receivables
Inventory
Deferred gross profit
2012 To record cash collections from installment sales
Cash
Installment receivables
2012 To recognize gross profit from installment sales
Deferred gross profit
Realized gross profit

Debit

Credit

300,000

Correct!

180,000
120,000

120,000
120,000 Correct!

400,000

Correct!

280,000
120,000

250,000
250,000 Correct!

40,000
40,000 Correct!

Instructor
McGraw-Hill/Irwin
Problem 05-02

Correct!

Correct!

Correct!

40%

Correct!

30%

Correct!

$48,000

Correct!

$40,000
45,000
$85,000

Correct!

Correct!

Gross Profit

Correct!

Correct!

Correct!

Correct!

$40,000
0
$40,000

Correct!

Given Data P05-02:

AJAX COMPANY
Installment Sales
Sales
Cost of sales
Customer collections on:
2011 sales
2012 sales

2011
300,000
180,000
120,000

2012
400,000
280,000
100,000
150,000

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 05-03
Requirement 1:
SILVA COMPANY
Gross Profit Recognized
Total profit
Installment sales method: Gross profit %

Cash collections
Point of delivery method
Installment sales method
Cost recovery method

$
$
$
$

8/31/2011
100,000
200,000
40,000
-

$
$
$
$

8/31/2012
100,000
40,000
-

$
$
$
$

200,000
40%
8/31/2013
100,000
40,000
-

$
$
$
$

8/31/2014
100,000
40,000
100,000

$
$
$
$

8/31/2015
100,000
40,000
100,000

Requirement 2:
SILVA COMPANY
General Journal

Account
Installment receivable
Sales revenue
Cost of goods sold
Inventory

Point of Delivery
Debit
Credit
500,000
500,000
300,000
300,000

Installment Sales
Debit
Credit

Cost Recovery
Debit
Credit

To record sale on 8/31/11.

Installment receivable
Inventory
Deferred gross profit

500,000

500,000
300,000
200,000

300,000
200,000

To record sale on 8/31/11.

Cash
Installment received

100,000

100,000
100,000

100,000
100,000

100,000

Entry made each Aug. 31.

Deferred gross profit

Realized gross profit

40,000
40,000

Entry made each Aug. 31.

Deferred gross profit

Realized gross profit
Entry made 8/31/14 & 8/31/15.

100,000
100,000

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 05-03
Requirement 3:
SILVA COMPANY
Partial Balance Sheet
Point of
Delivery

Installment
Sales

Cost
Recovery

December 31, 2011

Assets
Installment receivable
Less deferred gross profit
Installment receivables, net

400,000

400,000
160,000
240,000

400,000
200,000
200,000

December 31, 2012

Assets
Installment receivable
Less deferred gross profit
Installment receivables, net

300,000

300,000
120,000
180,000

300,000
200,000
100,000

Given Data P05-03:

SILVA COMPANY
Merchandise sold
Down payment
Annual installments (4)
Book value of merchandise

$
$
$
$

500,000
100,000
100,000
300,000

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 05-05
WESTGATE CONSTRUCTION COMPANY
Requirement 1:
Gross profit to be recognized
Contract price
Actual costs to date
Estimated costs to complete
Total estimated costs
Estimated gross profit (loss)

2011
10,000,000
2,400,000
5,600,000
8,000,000
2,000,000

Correct!
Gross profit (loss)
recognition:

2012
10,000,000
6,000,000
2,000,000
8,000,000
2,000,000

Correct!

2011
600,000
Correct!

2012
900,000
Correct!

2013
10,000,000
8,200,000
8,200,000
1,800,000
Correct!

2013
300,000
Correct!

Requirement 2:
WESTGATE CONSTRUCTION COMPANY
General Journal
2011
Debit
2,400,000

Account
Construction in progress

2012
Debit
3,600,000

Credit
2,400,000

Various accounts

Credit

2013
Debit
2,200,000

3,600,000

Credit
2,200,000

To record construction costs.

2,000,000

Accounts receivable

4,000,000

4,000,000

2,000,000

Billings on construction contract

4,000,000

4,000,000

To record progress billings.

1,800,000

Cash

3,600,000

4,600,000

1,800,000

Accounts receivable

3,600,000

4,600,000

To record cash collections

600,000
2,400,000

Construction in progress
Cost of construction

900,000
3,600,000

300,000
2,200,000

3,000,000

Rev. from long-term contracts

4,500,000

To record gross profit.

Requirement 3:
WESTGATE CONSTRUCTION COMPANY
Partial Balance Sheet
2011
Current assets:
Accounts receivable
Construction in progress
Less: Billings
Costs and profit in excess
of billings

2012
$

200,000

3,000,000
(2,000,000)

$
$

1,000,000

600,000

1,500,000

7,500,000
(6,000,000)

2,500,000

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 05-05
Requirement 4:
Costs incurred during year
Estimated cost to complete
as of year-end

Contract price
Actual costs to date
Estimated costs to complete
Total estimated costs
Estimated gross profit (loss)

2011
2,400,000

5,600,000

2011
10,000,000
2,400,000
5,600,000
8,000,000
2,000,000

2011
600,000
Correct!

2013
3,200,000

3,100,000

Correct!
Gross profit (loss)
recognition:

2012
3,800,000

2012
10,000,000
6,200,000
3,100,000
9,300,000
700,000

2013
10,000,000
9,400,000
9,400,000
600,000

Correct!

Correct!

2012
(133,333) $
Correct!

2013
133,333
Correct!

Requirement 5:
Costs incurred during year
Estimated cost to complete
as of year-end

Contract price
Actual costs to date
Estimated costs to complete
Total estimated costs
Estimated gross profit (loss)

2011
2,400,000

5,600,000

2011
10,000,000
2,400,000
5,600,000
8,000,000
2,000,000

2011
600,000
Correct!

2013
3,900,000

4,100,000

Correct!
Gross profit (loss)
recognition:

2012
3,800,000

2012
10,000,000 $
6,200,000
4,100,000
10,300,000
(300,000) $

2013
10,000,000
10,100,000
10,100,000
(100,000)

Correct!

Correct!

2012
(900,000) $
Correct!

2013
200,000
Correct!

Given Data P5-05:

WESTGATE CONSTRUCTION COMPANY
Contract information:
Contract amount

Cost incurred during the year

Estimated costs to complete as of year-end
Billings during the year
Cash collections during the year

$10,000,000
2011
$ 2,400,000
5,600,000
2,000,000
1,800,000

2012
$ 3,600,000
2,000,000
4,000,000
3,600,000

2013
$ 2,200,000
4,000,000
4,600,000

2012
$ 3,800,000
3,100,000

2013
$ 3,200,000
-

2012
$ 3,800,000
4,100,000

2013
$ 3,900,000
-

Costs incurred and costs to complete information (Part 4):

Costs incurred during the year

Estimated costs to complete as of year-end

2011
$ 2,400,000
5,600,000

Costs incurred and costs to complete information (Part 5):

Costs incurred during the year

Estimated costs to complete as of year-end

2011
$ 2,400,000
5,600,000