Question

35) The following aging information pertains to Jacobsen Co.'s accounts receivable at December 31, 2021:

Days Outstanding		Amount					Estimated % Uncollectible
0-30		$	420,000						2	%
31-60			140,000						5	%
61-120			100,000						10	%
Over 120			120,000						20	%

During 2021, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2020, allowance for uncollectible accounts was $40,000. Using the balance sheet approach, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2021?

A) $55,400.

B) $28,000.

C) $49,400.

D) $31,400.

Problem 1

Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2020 and completed in 2021. Cost and other data are presented below:

                                                                          2020                           2021

Costs incurred during the year                    $ 450,000                  $1,100,000

Estimated costs to complete                       1,050,000                                  0

Billings during the year                                400,000                    1,400,000

Cash collections during the year                   300,000                    1,500,000

Assume that Beavis recognizes revenue on this contract over time according to percentage of completion.

Required:

1. Prepare all journal entries to record costs, billings, collections, and profit recognition for

    2020

  

2. Prepare all journal entries to record costs, billings, collections, profit recognition and     

     completion of the project for 2021

Answer 1

Solution:

35)

Days outstanding	Amount	Estimated % Uncollectible	Estimated amount uncollectible
0-30	$420,000	2%	$8,400
31-60	$140,000	5%	$7,000
61-120	$100,000	10%	$10,000
120+	$120,000	20%	$24,000
Total			$494,000

Therefore the correct option is C: $49,400

Problem 1:

1)

2020
Date	Account title	Debit	credit
2020	Construction work in process	$450,000
	cash		$450,000
2020	Accounts receivable	$400,000
	Billings on construction contract		$400,000
2020	Cash	$300,000
	Account receivable		$300,000
2020	Construction work in process	$90,000
	Construction expense	$450,000
	Construction revenue		$540,000

2)

2021
Date	Account title	Debit	credit
2021	Construction work in process	$1,100,000
	cash		$1,100,000
2021	Accounts receivable	$1,400,000
	Billings on construction contract		$1,400,000
2021	Construction work in process	$160,000
	Construction expense	$1,100,000
	Construction revenue ($1,800,000 -$540,000)		$1,260,000
2021	Billing on construction contract	$1,800,000
	Construction work in process		$1,800,000

Working:

Percentage of work completed for 2020 = Expenditures Incurred from Inception to Date / Total Estimated Costs for the Contract                     

Total Estimated Costs for the Contract=$450,000+$1,050,000

=$1,500,000

Percentage of work completed for 2020 =$450,000/$1,500,000

=30%

Revenue recognized for 2020 = Total Contract price * percentage of completion

=$1,800,000*30%

=$540,000

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