due by 01/20/13 at 6pm is only 7 short exercises

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1. Jansen Corporation shipped $18,400 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $1,760. Gooch Company paid $720 for local advertising, which is reimbursable from Jansen. By year-end, 63% of the merchandise had been sold for $21,900. Gooch notified Jansen, retained a 9% commission, and remitted the cash due to Jansen. Prepare Jansen’s entry when the cash is received. (Round answers to 0 decimal places, e.g. 1,525. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit




(To record the cash remitted to Jansen.)


(To record the cost of inventory sold on consignment.)
Cash	=	[$21,900 – $720 – ($21,900 x 9%)]	=	$19,209
Inventory on Consignment	=	[63% x ($18,400 + $1,760)]	=	$12,701

2. Turner, Inc. began work on a $7,723,000 contract in 2012 to construct an office building. During 2012, Turner, Inc. incurred costs of $1,702,140, billed its customers for $1,333,000, and collected $978,300. At December 31, 2012, the estimated future costs to complete the project total $3,455,860. Prepare Turner’s 2012 journal entries using the percentage-of-completion method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For costs incurred use account Materials, Cash, Payables.)

No.	Account Titles and Explanation	Debit	Credit
(1)

	(To record costs incurred.)
(2)

	(To record billings.)
(3)

	(To record collections.)
(4)


	(To recognize revenue.)
Construction in Process	=	[($1,702,140 ÷ 5,158,000) x $2,565,000]	=	$846,450
Revenue from Long-Term Contracts	=	($7,723,000 x 33%)	=	$2,548,590

3.Gordeeva Corporation began selling goods on the installment basis on January 1, 2012. During 2012, Gordeeva had installment sales of $110,000; cash collections of $67,100; cost of installment sales of $77,000. Prepare the company’s entries to record 1) installment sales, 2) cash collected, 3) cost of installment sales, 4) deferral of gross profit, and 5) gross profit recognized, using the installment-sales method. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
1.

2.

3.

4.


5.

4.On June 3, Hunt Company sold to Ann Mount merchandise having a sales price of $11,000 with terms of 3/10, n/60, f.o.b. shipping point. An invoice totaling $120, terms n/30, was received by Mount on June 8 from the Olympic Transport Service for the freight cost. Upon receipt of the goods, June 5, Mount notified Hunt Company that merchandise costing $600 contained flaws that rendered it worthless. The same day, Hunt Company issued a credit memo covering the worthless merchandise and asked that it be returned at company expense. The freight on the returned merchandise was $28, paid by Hunt Company on June 7. On June 12, the company received a check for the balance due from Mount. (a) Prepare journal entries for Hunt Company to record all the events noted above under each of the following bases. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) 1. Sales and receivables are entered at gross selling price

Date	Account Titles and Explanation	Debit	Credit
6/3

6/5

6/7

6/12

2. Sales and receivables are entered net of cash discounts.

Date	Account Titles and Explanation	Debit	Credit
6/3

6/5

6/7

6/12

(b) Prepare the journal entry under basis (2), assuming that Ann Mount did not remit payment until August 5. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit



(a) 1.		6/12	Sales Discounts	(3% x $10,400)	$312
2.		6/3	Sales Revenue	[$11,000 – (3% x $11,000)]	$10,670
		6/5	Accounts Receivable (Ann Mount)	[$600 – (3% x $600)]	$582

(b)		8/5	Sales Discounts Forfeited	(3% x $10,400)	$312

5. (Recognition of Profit, Percentage-of-Completion)

In 2012 Gurney Construction Company agreed to construct an apartment building at a price of $1,200,000. The information relating to the costs and billings for this contract is shown below.

	2012	2013	2014
Cost incurred to date	$280,000		$600,000	$785,000
Estimated costs yet to be incurred	520,000		200,000	-0-
Customer billings to date	150,000		500,000	1,200,000
Collection of billings to date	120,000		320,000	940,000

(a)

Assuming that the percentage-of-completion method is used.

(1)

Compute the amount of gross profit to be recognized in 2012 and 2013.

	2012	2013
Gross profit recognized	$	$

(2)

Prepare journal entries for 2013.

Description/Account	Debit	Credit

Materials, Cash, Payables, etc.


Cash

Construction Expense

(b)

For 2013, show how the details related to this construction contract would be disclosed on the balance sheet and on the income statement.

Income Statement (2013)
	$

Balance Sheet (12/31/13)

	$
	$
(a) (1)	Gross profit recognized

2012	2013
$140,000	$160,000

Gross profit recognized in 2012:
Contract price		$1,200,000
Costs:
Costs to date	$280,000
Estimated additional costs	520,000	800,000
Total estimated profit		400,000
Percentage completion to date
($280,000/$800,000)		35%
Gross profit recognized in 2012		$140,000

Gross profit recognized in 2013:
Contract price		$1,200,000
Costs:
Costs to date	$600,000
Estimated additional costs	200,000	800,000
Total estimated profit		400,000
Percentage completion to date
($600,000/$800,000)		75%
Total Gross profit recognized		300,000
Less: Gross profit recognized in 2012		140,000
Gross profit recognized in 2013		$160,000

(2)	Journal entries for 2013.

Description/Account	Debit	Credit
Construction in Process ($600,000 - $280,000)	320,000
Materials, Cash, Payables, etc.		320,000
Accounts Receivable ($500,000 - $150,000)	350,000
Billings on Construction in Process		350,000
Cash ($320,000 - $120,000)	200,000
Accounts Receivable		200,000
Construction Expense	320,000
Construction in Process	160,000
Revenues from Long-Term Contract		*480,000

* 1,200,000 × [($600,000 – $280,000) ÷ $800,000]

(b)

Income Statement (2013)
Gross profit on long-term construction project	$160,000

Balance Sheet (12/31/13)
Current assets:
Receivables- construction in process	* $180,000
Inventories-construction in process totaling	$400,000
($900,000 ** less billings of $500,000)

* $180,000 = $500,000 – $320,000

**Total cost to date	$600,000
2012 Gross profit	140,000
2013 Gross profit	160,000
	$900,000

6. (Gross Profit Calculations and Repossessed Merchandise)

Basler Corporation, which began business on January 1, 2012, appropriately uses the installment-sales method of accounting. The following data were obtained for the years 2012 and 2013.

	2012	2013
Installment Sales	$750,000	$840,000
Cost of installment sales	510,000	588,000
General & administrative expenses	70,000	84,000
Cash collections on sales of 2012	310,000	300,000
Cash collections on sales of 2013	-0-	400,000

(a)

Compute the balance in the deferred gross profit accounts on December 31, 2012, and on December 31, 2013.

Deferred Gross Profit Account	2012 Installment Sales	2013 Installment Sales
Balance, December 31, 2012	$
Balance, December 31, 2013	$	$

(b)

A 2012 sale resulted in default in 2014. At the date of default, the balance on the installment receivable was $12,000, and the repossessed merchandise had a fair value of $8,000. Prepare the entry to record the repossession. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Description/Account	Debit	Credit




(To record the default and the repossession of the merchandise)

Gross Profit Rate-2012: ($750,000 – $510,000) ÷ $750,000 = 32%

Gross Profit Rate-2013: ($840,000 – $588,000) ÷ $840,000 = 30%

(a)

Deferred Gross Profit Account	2012 Installment Sales	2013 Installment Sales
Balance, December 31, 2012	$140,800
Balance, December 31, 2013	$44,800	$132,000

Balance, December 31, 2012
Deferred Gross Profit Account-2012 Installment Sales
Gross profit on installment sales-2012 ($750,000 - $510,000)	$240,000
Less: Gross profit realized in 2012 ($310,000 × 32%)	(99,200)
Balance at 12/31/12	$140,800

Balance, December 31, 2013
Deferred Gross Profit Account-2012 Installment Sales
Balance at 12/31/12	$140,800
Less: Gross profit realized in 2013 on 2012 sales ($300,000 × 32%)	(96,000)
Balance at 12/31/13	$44,800

Deferred Gross Profit Account-2013 Installment Sales
Gross profit on installment sales-2013 ($840,000 - $588,000)	$252,000
Less: Gross profit realized in 2013 on 2013 sales ($400,000 × 30%)	(120,000)
Balance at 12/31/13	$132,000

(b)

Description/Account	Debit	Credit
Repossessed Merchandise	8,000
Deferred Gross Profit ($12,000 × 32%)	3,840
Loss on Repossession [$8,000 - ($12,000 - $3,840)]	160
Installment Accounts Receivable		12,000
(To record the default and the repossession of the merchandise)

7. Shanahan Construction Company has entered into a contract beginning January 1, 2012, to build a parking complex. It has been estimated that the complex will cost $849,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $1,411,000. The following data pertain to the construction period.

	2012	2013	2014
Costs to date	$382,050	$602,790	$862,000
Estimated costs to complete	466,950	246,210	–0–
Progress billings to date	328,000	529,000	1,411,000
Cash collected to date	305,000	497,000	1,411,000

(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.

Gross profit recognized in 2012		$
Gross profit recognized in 2013		$
Gross profit recognized in 2014		$

(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.

Gross profit recognized in 2012		$
Gross profit recognized in 2013		$
Gross profit recognized in 2014		$

(a)

	2012	2013	2014
Contract price	$1,411,000	$1,411,000	$1,411,000
Less estimated cost:
Costs to date	382,050	602,790	862,000
Estimated cost to complete	466,950	246,210	—
Estimated total cost	849,000	849,000	862,000
Estimated total gross profit	$562,000	$562,000	$549,000

Gross profit recognized in—

2012:	$382,050	x	$562,000	=	$252,900
	$849,000
2013:	$602,790	x	$562,000	=		$399,020
	$849,000
	Less 2012 recognized gross profit					252,900
	Gross profit in 2013					$146,120

2014:	Estimated total gross profit for 2014						$549,000
	Less 2012–2013 recognized gross profit						399,020
	Gross profit in 2014						$149,980

(b) In 2012 and 2013, no gross profit would be recognized.

Total billings	$1,411,000
Total cost	(862,000	)
Gross profit recognized in 2014	$549,000

Realized Gross Profit = (30% x $67,100) = $20,130