Test Bank for Intermediate Accounting
COMPREHENSIVE EXAMINATION E
PART 5
(Chapters 18-21)
Approximate
Problem Topic Time E-I Long-Term Contracts. 15 min. E-II Installment Sales Method. 20 min. E-III Deferred Income Taxes. 25 min. E-IV Pensions. 15 min. E-V Leases. 25 min. 100 min.
Problem E-I — Long-Term Contracts.
Edwards Company contracted on 4/1/14 to construct a building for $2,400,000. The project was completed in 2016. Additional data follow:
2014 2015 2016 Costs incurred to date $ 560,000 $1,350,000 $1,900,000 Estimated cost to complete 1,040,000 450,000 — Billings to date 500,000 1,900,000 2,400,000 Collections to date 400,000 1,300,000 2,200,000
Instructions
(a) Calculate the income recognized by Edwards under the percentage-of-completion method of accounting in each of the years 2014, 2015, and 2016.
(b) Prepare all necessary entries for the year 2015.
(c) Present the balance sheet disclosures at December 31, 2015. Proper headings or subheadings must be indicated.
Problem E-II — Installment Sales Method.
Garber, Inc. accounts for all sales of its merchandise on the installment basis. Following is the unadjusted trial balance at 12/31/16:
Cash $ 64,200 Installment Accounts Receivable—2014 170,000 Installment Accounts Receivable—2015 400,000 Installment Accounts Receivable—2016 750,000 Inventory, 1/1/16 103,000 Repossessed Merchandise 22,000 Accounts Payable $ 136,000 Deferred Gross Profit—2014 84,000 Deferred Gross Profit—2015 175,000 Common Stock 600,000 Retained Earnings 406,200 Installment Sales 1,000,000 Purchases 738,000 Loss on Repossession 4,000 Operating Expenses 150,000 $2,401,200 $2,401,200
Additional Data: 2014 Gross Profit Rate = 32%; Inventory 12/31/16 = $159,000; Repossessed merchandise 12/31/16 = $14,000; Merchandise sold in 2015 was repossessed in 2016 and the following entry was prepared (assume correctly): Deferred Gross Profit—2015 14,000 Repossessed
PART 5
(Chapters 18-21)
Approximate
Problem Topic Time E-I Long-Term Contracts. 15 min. E-II Installment Sales Method. 20 min. E-III Deferred Income Taxes. 25 min. E-IV Pensions. 15 min. E-V Leases. 25 min. 100 min.
Problem E-I — Long-Term Contracts.
Edwards Company contracted on 4/1/14 to construct a building for $2,400,000. The project was completed in 2016. Additional data follow:
2014 2015 2016 Costs incurred to date $ 560,000 $1,350,000 $1,900,000 Estimated cost to complete 1,040,000 450,000 — Billings to date 500,000 1,900,000 2,400,000 Collections to date 400,000 1,300,000 2,200,000
Instructions
(a) Calculate the income recognized by Edwards under the percentage-of-completion method of accounting in each of the years 2014, 2015, and 2016.
(b) Prepare all necessary entries for the year 2015.
(c) Present the balance sheet disclosures at December 31, 2015. Proper headings or subheadings must be indicated.
Problem E-II — Installment Sales Method.
Garber, Inc. accounts for all sales of its merchandise on the installment basis. Following is the unadjusted trial balance at 12/31/16:
Cash $ 64,200 Installment Accounts Receivable—2014 170,000 Installment Accounts Receivable—2015 400,000 Installment Accounts Receivable—2016 750,000 Inventory, 1/1/16 103,000 Repossessed Merchandise 22,000 Accounts Payable $ 136,000 Deferred Gross Profit—2014 84,000 Deferred Gross Profit—2015 175,000 Common Stock 600,000 Retained Earnings 406,200 Installment Sales 1,000,000 Purchases 738,000 Loss on Repossession 4,000 Operating Expenses 150,000 $2,401,200 $2,401,200
Additional Data: 2014 Gross Profit Rate = 32%; Inventory 12/31/16 = $159,000; Repossessed merchandise 12/31/16 = $14,000; Merchandise sold in 2015 was repossessed in 2016 and the following entry was prepared (assume correctly): Deferred Gross Profit—2015 14,000 Repossessed