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BE18-7 Turner, Inc. began work on a $7,000,000 contract in 2012 to construct an office building. During 2012, Turner, Inc.

incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2012, the estimated future costs to complete the project total $3,300,000. Prepare Turners 2012 journal entries using the percentage-of-completion method. Total Contract Total Estimated Cost Estimated (GP) from contract Under Percentage Method Percentage of completion Gross profit to be recognized Percentage of Completed Cost incurred Gross Profit to be recognized Total Charge to CIP (Construction in Progress) 1,700,000 1,040,000 2,740,000 0.5151515 1040000 7,000,000 5,000,000 (1700000+3300000) 2000000

Date 1 2 3 Date 1 2 3 Construction in Process Construction Expenses Construction In Progress

Activities Materials Cash and Payables A/R Billings on Construction in Process Cash Activities

Dr 1,700,000

Cr 1,700,000

1,200,000 1,200,000 960,000 Dr 680,000 1,700,000 2,380,000 Cr

Revenue from Long-Term Contracts

BE18-14 At December 31, 2012, Grinkov Corporation had the following account balances. Installment Accounts Receivable, 2011 65,000 Installment Accounts Receivable, 2012 110,000 Deferred Gross Profit, 2011 23,400 Deferred Gross Profit, 2012 41,800 Most of Grinkovs sales are made on a 2-year installment basis. Indicate how these accounts would reported in Grinkovs December 31, 2012, balance sheet. The 2011 accounts are collectible in 2013 2012 accounts are collectible in 2014. Partial Balance Sheet as of Dec 31, 2012 Assets Current Assets Installment accounts Receivable due in 2011 Receivable due in 2012 Liabilities Current Liabilities Deferred 65,000 gross profit 65,000 =(23,400+41,800) 110,000 175,000

E18-24 (Installment-Sales Method and Cost-Recovery Method) On January 1, 2012, Wetzel Compan property for $250,000. The note will be collected as follows: $120,000 in 2012, $90,000 in 2013, an in 2014. The property had cost Wetzel $150,000 when it was purchased in 2010. Instructions (a) Compute the amount of gross profit realized each year, assuming Wetzel uses the cost-recovery (b) Compute the amount of gross profit realized each year, assuming Wetzel uses the installment-s a Computation of gross profit realized for cost-recovery method Balance of Cash Original Gross Profit Unrecovered Year Received cost Realized Cost Beginning balance 150,000 2012 120,000 120,000 30,000 0 2013 90,000 30,000 0 60,000 2014 40,000 0 0 40,000 b Computation of gross profit realized for installment-sales method Gross profit rate =( 250,000-150,000) / 250,000

40%

Gross profit realized for 2012 Gross profit realized for 2013 Gross profit realized for 2014

$48,000 =120000*40% $36,000 =90000*40% $16,000 =40000*40%

e building. During 000, and collected e project total mpletion method.

=[1,700,000/5,000,000)*2,000000] =7,000,000*34%

balances.

ese accounts would be collectible in 2013, and the

00+41,800)

12, Wetzel Company sold $90,000 in 2013, and $40,000

es the cost-recovery method. es the installment-sales method.