ACC 421 Week 2 WileyPlus Assignment

E4-6 (Multiple-step and Single-step) The accountant of Whitney Houston Shoe Co. has compiled the following information from the company's records as a basis for an income statement for the year ended December 31, 2007. Rental revenue $ 29,000 Interest on notes payable 18,000 Market appreciation on land above cost 31,000 Wages and salaries—sales 114,800 Materials and supplies—sales 17,600 Income tax 37,400 Wages and salaries—administrative 135,900 Other administrative expenses51,700 Cost of goods sold 496,000 Net sales 980,000 Depreciation on plant assets (70% selling, 30% administrative) 65,000 Cash dividends declared 16,000 There were 20,000 shares of common stock outstanding during the year. Instructions (a) Prepare a multiple-step income statement. (b) Prepare a single-step income statement. (c) Which format do you prefer? Discuss.

E4-16 (Various Reporting Formats) The following information was taken from the records of Roland Carlson Inc. for the year 2007. Income tax applicable to income from continuing operations $187,000; income tax applicable to loss on discontinued operations $25,500; income tax applicable to extraordinary gain $32,300; income tax applicable to extraordinary loss $20,400; and unrealized holding gain on available-for-sale securities $15,000.

Extraordinary gain $ 95,000 Cash dividends declared $ 150,000
Loss on discontinued operations75,000 Retained earnings January 1, 2007 600,000
Administrative expenses 240,000 Cost of goods sold850,000
Rent revenue40,000 Selling expenses 300,000
Extraordinary loss60,000 Sales 1,900,000
Shares outstanding during 2007 were 100,000.
Instructions
(a) Prepare a single-step income statement for 2007.
(b) Prepare a retained earnings statement for 2007.
(c) Show how comprehensive income is reported using the second income statement format.

E18-4 (Recognition of Profit on Long-Term Contracts) During 2007 Pierson Company started a construction job with a contract price of $1,500,000. The job was completed in 2009. The following information is available.
2007 2008 2009
Costs incurred to date $400,000 $935,000 $1,070,000
Estimated costs to complete 600,000 165,000–0–
Billings to date300,000 900,000 1,500,000
Collections to date 270,000 810,000 1,425,000
Instructions
(a) Compute the amount of gross profit to be recognized each year assuming the percentage-of completion method is used.
(b) Prepare all necessary journal entries for 2008.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.

E18-5 (Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction
Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Beth
Botsford uses the percentage-of-completion method for financial accounting purposes. The income to berecognized each year is based on the proportion of cost incurred to total estimated costs for completingthe contract. The financial statement presentations relating to this contract at December 31, 2007, follow.
Balance Sheet

Accounts receivable—construction contract billings $21,500
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500
Income Statement
Income (before tax) on the contract recognized in 2007 $18,200

Instructions
(a) How much cash was collected in 2007 on this contract?
(b) What was the initial estimated total income before tax on this contract?

P18-7 (Long-Term Contract with an Overall Loss) On July 1, 2007, Kyung-wook Construction Company Inc. contracted to build an office building for Mingxia Corp. for a total contract price of $1,950,000. On July 1, Kyung-wook estimated that it would take between 2 and 3 years to complete the building. On December 31, 2009, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Mingxia for 2007, 2008, and 2009.
AtAt At
12/31/07 12/31/0812/31/09
Contract costs incurred to date$ 150,000 $1,200,000 $2,100,000
Estimated costs to complete the contract1,350,000800,000 –0–
Billings to Mingxia300,0001,100,0001,850,000

Instructions
(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2007, 2008, and 2009. (Ignore income taxes.)
(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be
recognized as a result of this contract for the years ended December 2007, 2008, and 2009. (Ignore income taxes.)