Documentos de Académico
Documentos de Profesional
Documentos de Cultura
EXERCISES
Exercise 5-1
Year
2013
2014
2015
2016
2017
Total
Requirement 1
Income recognized
$250,000 ($400,000 - 150,000)
0
0
0
0
$250,000
Requirement 2
Year
2013
2014
2015
2016
2017
Totals
Cash Collected
$100,000
75,000
75,000
75,000
75,000
$400,000
Cost Recovery(37.5%)
$ 37,500
28,125
28,125
28,125
28,125
$150,000
Gross Profit(62.5%)
$ 62,500
46,875
46,875
46,875
46,875
$250,000
Cost Recovery
$100,000
50,000
-0-0-0$150,000
Gross Profit
-0$ 25,000
75,000
75,000
75,000
$250,000
Requirement 3
Year
2013
2014
2015
2016
2017
Totals
Cash Collected
$100,000
75,000
75,000
75,000
75,000
$400,000
Exercise 5-2
Requirement 1
Contract price
Actual costs to date
Estimated costs to complete
Total estimated costs
Estimated (actual) gross profit
2013
$2,600,000
360,000
1,560,000
1,920,000
$ 680,000
2014
$2,600,000
2,010,000
-02,010,000
$ 590,000
Requirement 2
2013
2014
$
-0$590,000
Requirement 3
Balance Sheet
At December 31, 2013
Current assets:
Accounts receivable
Costs and profit ($487,500)* in excess
of billings ($430,000)
$ 110,000
57,500
$ 110,000
Current liabilities:
Billings ($430,000) in excess of costs ($360,000)
$ 70,000
Exercise 5-3
Requirement 1
Contract price
Actual costs to date
Estimated costs to complete
Total estimated costs
Estimated gross profit (loss)
2013
$12,000,000
3,000,000
6,000,000
9,000,000
$ 3,000,000
2014
$12,000,000
7,000,000
5,600,000
12,600,000
$ (600,000)
2015
$12,000,000
12,800,000
-012,800,000
$ (800,000)
= $(1,600,000)
2013
2014
3,000,000
4,000,000
3,000,000
4,000,000
Accounts receivable
Billings on construction contract
To record progress billings.
3,800,000
3,500,000
3,800,000
3,500,000
Cash
Accounts receivable
To record cash collections.
3,250,000
3,600,000
3,250,000
3,600,000
Construction in progress
(gross profit)
Cost of construction
Revenue from long-term contracts
1,000,000
3,000,000
4,000,000
(33.3333% x $12,000,000)
(1)
4,266,667
2,666,667
1,600,000
2013
Current assets:
Accounts receivable
Costs and profit ($4,000,000)* in
excess of billings ($3,800,000)
2014
$550,000 $450,000
200,000
Current liabilities:
Billings ($7,300,000) in excess
of costs less loss ($6,400,000)
$900,000
Exercise 5-4
November 15, 2013 To record franchise agreement and down payment
Cash (50% x $25,000)........................................................ 12,500
Note receivable............................................................... 12,500
Unearned franchise fee revenue..................................
25,000
Exercise 5-5
25,000
Turnover ratios for Garret & Sons Music Company for 2013:
$6,000,000
[$850,000 + 700,000] 2
7.74 times
$10,000,000
[$800,000 + 600,000] 2
14.29 times
365
14.29
25.5 days
$10,000,000
[$4,490,000 + 4,100,000]
2.33 times
The company turns its inventory over 7 times per year compared to the industry
average of 6 times per year. The asset turnover ratio also is slightly better than the
industry average (2.33 times per year versus 2 times). These ratios indicate that Garret
& Sons is able to generate more sales per dollar invested in inventory and in total assets
than the industry averages. The company also is able to collect its receivables quicker
than the industry average (25.5 days compared to the industry average of 28 days).
Exercise 5-6
Requirement 1
$360 $7,200 = 5%
$360 [($2,900 + 2,700) 2] = 12.86%
$360 [($1,700 + 1,550) 2] = 22.2%
Requirement 2
a. Profit margin on sales
$360 $7,200 = 5%
b. Asset turnover
$7200 [($2,900 + 2,700) 2] = 2.57
c. Equity multiplier
[($2,900 + 2,700) 2] [($1,700 + 1,550) 2] = 1.72
d. Return on shareholders equity
$360 [($1,700 + 1,550) 2] = 22.2%
5% x 2.57 x 1.72 = 22.1%
The McGraw-Hill Companies, Inc., 2013
5-6
Requirement 3
Retained earnings beginning of period
Add: Net income
Less: Retained earnings end of period
Dividends paid
$550,000
360,000
910,000
700,000
$210,000
Exercise 5-7Requirement 1
$30,000 + ($10,000 x 35%) = $33,500
Requirement 2
The most likely amount is $30,000, because the probability of exceeding the
performance threshold is less than 50%.
Requirement 3
Given that the outcome is binary (Mohan either will receive the bonus or not), the
most likely amount often would be preferred. However, both amounts can be
justified theoretically. (The probability-weighted amount is an expected value, and
thus over all such contracts is the best estimate of the average amount that will be
received.)
Requirement 4
Given that aspects of receipt of the bonus are beyond Mohans control (because
Fisher is responsible for implementation), Mohan would view the bonus as not
reasonably assured. Therefore, Mohan would recognize only $30,000 upon
delivery of the plan and wait until receipt of the bonus is reasonably assured
(likely waiting until cost saving reaches the pre-specified target) before
recognizing the bonus.
PROBLEMS
Problem 5-1
Requirement 1
$400,000
-0-
-0-
-0-
- 0 - $200,000 $200,000
Installment receivable
Sales revenue
Cost of goods sold
Inventory
To record sale on 10/31/13.
Point of
Delivery
800,000
800,000
400,000
400,000
Installment receivable
Inventory
Deferred gross profit
To record sale on 10/31/14.
Cash
Installment receivable
Entry made each Oct. 31.
Deferred gross profit
Realized gross profit
To record gross profit.
Entry made each Oct. 31.
Deferred gross profit
Realized gross profit
To record gross profit.
Entry made 10/31/15 &
10/31/16.
Installment
Sales
800,000
Cost Recovery
800,000
400,000
400,000
200,000
200,000
200,000
400,000
400,000
200,000
200,000
200,000
100,000
100,000
200,000
200,000
Installment
Sales
Cost
Recovery
600,000
600,000
(300,000)
300,000
600,000
(400,000)
200,000
400,000
400,000
(200,000)
200,000
400,000
(400,000)
-0-
Problem 5-2Requirement 1
Contract price
Actual costs to date
Estimated costs to complete
Total estimated costs
Estimated gross profit (loss)
2013
$15,000,000
4,000,000
8,000,000
12,000,000
$ 3,000,000
2014
$15,000,000
8,800,000
4,000,000
12,800,000
$ 2,200,000
2015
$15,000,000
13,000,000
-013,000,000
$ 2,000,000
2013
2014
2015
Construction in progress
Various accounts
To record construction costs.
4,000,000
4,800,000
4,200,000
4,000,000
4,800,000
4,200,000
Accounts receivable
Billings on construction contract
To record progress billings.
3,500,000
5,000,000
6,500,000
3,500,000
5,000,000
6,500,000
Cash
Accounts receivable
To record cash collections.
2,800,000
5,600,000
6,600,000
2,800,000
5,600,000
6,600,000
$5,000,000
$10,312,500
(5,000,000)
$5,312,500
$15,000,000
(10,312,500)
$4,687,500
Requirement 3
Balance Sheet
Current assets:
Accounts receivable
Construction in progress
Less: Billings
Costs and profit in excess
of billings
2013
2014
$ 700,000
$5,000,000
(3,500,000)
$100,000
$10,312,500
(8,500,000)
1,500,000
1,812,500
Requirement 4
Costs incurred during the year
Estimated costs to complete
as of year-end
Contract price
Actual costs to date
Estimated costs to complete
Total estimated costs
Estimated gross profit (loss)
2013
$4,000,000
2014
$4,200,000
8,000,000
7,100,000
2013
$15,000,000
4,000,000
8,000,000
12,000,000
$ 3,000,000
2014
$15,000,000
8,200,000
7,100,000
15,300,000
$ (300,000)
2015
$7,200,000
2015
$15,000,000
15,400,000
-015,400,000
$ (400,000)
Problem 5-3Requirement 1
a.
b.
c.
Since the discount voucher of the yoga course would be a distinct performance
obligation, SZ would recognize revenue for the sale of annual membership fee
and discount voucher.
Cash
Unearned revenue, membership fees
Unearned revenue, yoga coupon
$500
$480.77
19.23
The option to pay $12 for additional visits does not constitute a material right,
because it is in the range ($10-$14) of normal fees paid by non-members.
Therefore, it is not a distinct performance obligation in the contract.
b.
c.
Cash
Unearned revenue, coupon book
$400
$400
SZ could recognize (1/30) $400 of revenue over time for each visit, since a
coupon book yields approximately 30 visits and the services are simultaneously
received and consumed by the buyer. Alternatively, SZ could recognize revenue
over the year following sale of a coupon book according to the passage of time
as an approximation of consumptions of visits.