Question

Information for 22 to 26. In 2012 Norcraft Sisters Construction agreed to construct a residence hall at University of Houston at a price of $1,200,000. The information relating to the costs and billings for this contract is shown below. 2012 2013 2014 Costs incurred during the year $ 280,000 $320,000 $850,000 Estimated costs to complete 520,000 300,000 –0– Customer billings to date 300,000 400,000 850,000 Collection of billings to date 200,000 320,000 800,000

22. Assuming that the percentage-of-completion method is used, compute the amount of gross profit (loss) to be recognized on income statement in 2012 and 2013, respectively

a. $400,000 and 300,000.

b. $140,000 and 60,000.

c. $140,000 and 200,000.

d. $0 and $0.

23. Assuming that the percentage-of-completion method is used, which of the following is reported on the balance sheet at Dec. 31, 2012?

a. Receivable under current assets with a balance of $420,000

b. Net of Construction in Progress and Billings on C.I.P under current assets with a balance of $120,000

c. Billings on C.I.P under current liabilities with a balance of $300,000

d. Construction in Progress under current liabilities with a balance of $280,000

24. Assuming that the percentage-of-completion method is used, what is the amount of Revenue from Long-Term Contracts and Construction Expenses recognized for the year 2013? Revenue Expenses

a. $800,000 $320,000

b. $380,000 $ 320,000

c. $380,000 $ 600,000

d. $800,000 $ 600,000

25. Assuming that the completed contract method is used, compute the amount of gross profit (loss) to be recognized in 2012 and 2013, respectively.

a. $50,000 and 60,000.

b. $0 and 60,000.

c. $50,000 and 300,000.

d. $0 and $0.

26. If in 2013, the estimated cost to complete is estimated to be 400,000, instead of 300,000, compute the gross profit (loss) recognized in 2013 for the percentage-of-completion method and the completed contract method, respectively

a. $(20,000) and 0.

b. $0 and (20,000).

c. $(20,000) and (20,000).

d. $0 and $0.

Answer 1

Number 22:
	2012	2013	2014
Contract Value A	1200000	1200000	1200000
Cost incurred during the year B	280000	600000	1450000
Estimated cost to complete C	520000	300000
Total Estimated Cost (B+C)=D	800000	900000	1450000
Total Estimated Gross Profit (A-D)=E	400000	300000	-250000
% Completion B/D%=F	35	66.67	100
Gross Profit Earned till date (E*F%)	140000	200000	-250000
Less: Recognized in previous Year	0	140000	60000
=to be recognized in current Year	140000	60000	-310000

Number 23
Net of construction in progress and billing on CIP under current asset with a balance of 120000

Number 24
Revenue 380000 and Expense 320000
Expense= Cost incurred during the year=600000-280000	320000
Revenue=Expense+Profit recognized during 2013=320000+60000	380000

Number 25: d 0 and 0 since in compelted method, contract revenue to be recognised after completion.

26
Completed Contract Method	0	0