Student Name:

Class:
Problem 05-02

Requirement 1:

2013 Cost recovery %:

= Gross profit % =

2014 Cost recovery %:

= Gross profit % =

2013 Gross Profit:

Cash collection from 2013 sales = X =

2014 Gross Profit:

Cash collection from 2013 sales = X =

Cash collection from 2014 sales = X =
Total 2014 gross profit

Requirement 2:

Date Account Debit Credit

2013 Installment receivables
Inventory
Deferred gross profit
To record installment sales

Cash
Installment receivables
To record cash collections from installment sales

Deferred gross profit

Realized gross profit
To recognize gross profit from installment sales

2014 Installment receivables

Inventory
Deferred gross profit
To record installment sales

Cash
 Installment receivables
To record cash collections from installment sales

Deferred gross profit

Realized gross profit
To recognize gross profit from installment sales
Requirement 3:

Date Cash
Collected Cost Recovery Gross Profit
2013
2013 sales

2014
2013 sales
2014 sales
2014 totals

Date Account Debit Credit

2013 Installment receivables
Inventory
Deferred gross profit
To record installment sales

Cash
Installment receivables
To record cash collections from installment sales

2014 Installment receivables

Inventory
Deferred gross profit
To record installment sales

Cash
Installment receivables
To record cash collections from installment sales

Deferred gross profit

Realized gross profit
To recognize gross profit from installment sales
Given Data P05-02:

AJAX COMPANY

Installment Sales 2013 2014

Sales $ 300,000 $ 400,000
Cost of sales 180,000 280,000
Customer collections on:
2013 sales 120,000 100,000
2014 sales 150,000
 Student Name:
Class:
Problem 05-03

Requirement 1:
SILVA COMPANY
Gross Profit Recognized

Total profit
Installment sales method: Gross profit %

8/31/2013 8/31/2014 8/31/2015 8/31/2016 8/31/2017

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

Requirement 2:
SILVA COMPANY
General Journal

Point of Delivery Installment Sales Cost Recov

Account Debit Credit Debit Credit Debit
Installment receivable
Sales revenue
Cost of goods sold
Inventory
To record sale on 8/31/13

Installment receivable
Inventory
Deferred gross profit
To record sale on 8/31/13

Cash
Installment received
To record cash collections (entry made each Aug. 31)

Deferred gross profit

Realized gross profit
To record gross profit (Entry made each Aug. 31)

Deferred gross profit

Realized gross profit
To record gross profit (Entry made 8/31/16 and 8/31/17)
 Student Name:
Class:
Problem 05-03

Requirement 3:
SILVA COMPANY
Partial Balance Sheet

Point of Installment Cost

Delivery Sales Recovery
December 31, 2013
Assets
Installment receivable
Less: Deferred gross profit
Installment receivables, net

December 31, 2014

Assets
Installment receivable
Less: Deferred gross profit
Installment receivables, net
VA COMPANY
neral Journal

Cost Recovery
Credit
Given Data P05-03:

SILVA COMPANY

Merchandise sold $ 500,000

Down payment $ 100,000
Annual installments (4) $ 100,000
Book value of merchandise $ 300,000
 Student Name:
Class:
Problem 05-05

WESTGATE CONSTRUCTION COMPANY

Requirement 1:
Gross profit to be recognized 2013 2014 2015
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 -
Total estimated costs 8,000,000 8,000,000 8,200,000
Estimated gross profit (loss) $ 2,000,000 $ 2,000,000 $ 1,800,000
Correct! Correct! Correct!

Gross profit (loss) 2013 2014 2015

recognition: $ 600,000 $ 900,000 $ 300,000
Correct! Correct! Correct!

Requirement 2:
WESTGATE CONSTRUCTION COMPANY
General Journal

2013 2014 2015

Account Debit Credit Debit Credit Debit Credit
Construction in progress 2,400,000 3,600,000 2,200,000
Various accounts 2,400,000 3,600,000 2,200,000
To record construction 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

Construction in progress 600,000 900,000 300,000

Cost of construction 2,400,000 3,600,000 2,200,000
Rev. from long-term contracts 3,000,000 4,500,000 2,500,000
To record gross profit.

Requirement 3:
WESTGATE CONSTRUCTION COMPANY
Partial Balance Sheet

2013 2014
Current assets:
Accounts receivable $ 200,000 $ 600,000
Construction in progress $ 3,000,000 Correct! $ 7,500,000 Correct!
Less: Billings (2,000,000) (6,000,000)
Costs and profit in excess $ 1,000,000 $ 1,500,000
of billings Correct! Correct!
 Student Name:
Class:
Problem 05-05

Requirement 4:
2013 2014 2015
Costs incurred during year $ 2,400,000 $ 3,800,000 $ 3,200,000
Estimated cost to complete
as of year-end 5,600,000 3,100,000 -

2013 2014 2015

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 -
Total estimated costs 8,000,000 9,300,000 9,400,000
Estimated gross profit (loss) $ 2,000,000 $ 700,000 $ 600,000
Correct! Correct! Correct!

Gross profit (loss) 2013 2014 2015

recognition: $ 600,000 $ (133,333) $ 133,333
Correct! Correct! Correct!

Requirement 5:
2013 2014 2015
Costs incurred during year $ 2,400,000 $ 3,800,000 $ 3,900,000
Estimated cost to complete
as of year-end 5,600,000 4,100,000 -

2013 2014 2015

Contract price $ 10,000,000 $ 10,000,000 $ 10,000,000
Actual costs to date 2,400,000 6,200,000 10,100,000
Estimated costs to complete 5,600,000 4,100,000 -
Total estimated costs 8,000,000 10,300,000 10,100,000
Estimated gross profit (loss) $ 2,000,000 $ (300,000) $ (100,000)
Correct! Correct! Correct!

Gross profit (loss) 2013 2014 2015

recognition: $ 600,000 $ (900,000) $ 200,000
Correct! Correct! Correct!
- Correct!
- Correct!

- Correct!
- Correct!

- Correct!
- Correct!

- Correct!
- Correct!
- Correct!
Given Data P5-05:

WESTGATE CONSTRUCTION COMPANY

Contract information:
Contract amount $10,000,000

2013 2014 2015

Cost incurred during the year $ 2,400,000 $ 3,600,000 $ 2,200,000
Estimated costs to complete as of year-end 5,600,000 2,000,000 -
Billings during the year 2,000,000 4,000,000 4,000,000
Cash collections during the year 1,800,000 3,600,000 4,600,000

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

2013 2014 2015

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 -

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

2013 2014 2015

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 -