Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2020–2023 are as follows:

There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 25%.

(Hint: You will find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2020–2023.)

Required:
1. to 3. Prepare the appropriate journal entries to record Alsup's 2021 income taxes, 2022 income taxes and 2023 income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

4. Complete the following table and answer the accompanying questions. Note: The missing variables can be computed using the mathematical definitions. This computation is best completed in MS Excel. Copy and paste the resulting table into this Word document.

A. At what level of labor (control variable) is profit (net benefit) maximized?

Your answer:

B. What is the relation between marginal revenue and marginal cost at this level of the control variable?                       

Your answer:

C. Graph Profit, Marginal Revenue, and Marginal Cost in a single line graph. Note that marginal revenue equals marginal cost where profit is maximized.

On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $400 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

Required:
1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2019 are $150 million instead of $50 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.

1. Imagine a league is composed of two teams, a larger (L) and a smaller (S) revenue team. W_L and W_S are their respective winning proportions. Their marginal revenue functions are (values in millions of dollars)

                                                MR_L = 90 – 90*W_L

                                                                        MR_S = 90 – 90*W_S

a. What is the equilibrium price of winning percent? Show it graphically as well.

b. What will be the values of W_L and W_S in equilibrium? Show them graphically as well.

c. What will be the equilibrium total talent bill for each? Identify them graphically as well.

2. Repeat problem number 1 with the following marginal revenue functions:

                                                MR_L = 95 – 90*W_L

                                                                        MR_S = 85 – 90*W_S

3. Repeat problem number 1 with the following marginal revenue functions:

                                                MR_L = 100 – 90*W_L

                                                                        MR_S =   80 – 90*W_S

4. Return to problem 2 marginal revenue curves. Suppose the league imposes a luxury tax of $45000 on each point (.001) over .500.

e. What is the new price of winning percent?

f. What are the new W_L and W_S in equilibrium?

g. What are the new equilibrium talent bills for each team?

On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $430 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

Required:
1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2019 are $210 million instead of $140 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.

Chapter 16—Prob. 6

Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2017-2020 are as follows:

                          Service Revenue                 Collections                     Pretax Accounting

                                                                                                                                Income

2017                       $610,000                              $590,000                              $150,000

2018                          710,000                                720,000                             215,000

2019                      675,000                             650,000                            185,000

2020                       660,000                            685,000                            165,000

There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 40%. (Hint: You may find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2017-2020,)

Required:

1. Prepare the appropriate journal entry to record Alsup’s 2018 income taxes, Alsup’s 2019 income taxes and Alsup’s 2020 income taxes. (Enter your answers in thousands. e.g. 150,000 should be entered as 150).)

Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2017–2020 are as follows:

There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 40%.

(Hint: You may find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2017–2020.)

Required:
1. Prepare the appropriate journal entry to record Alsup's 2018 income taxes, Alsup’s 2019 income taxes and Alsup’s 2020 income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousands.)

Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2017–2020 are as follows: Service Revenue Collections Pretax Accounting Income 2017 $ 610,000 $ 590,000 $ 150,000 2018 710,000 720,000 215,000 2019 675,000 650,000 185,000 2020 660,000 685,000 165,000 There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 40%. (Hint: You may find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2017–2020.) Required: 1. Prepare the appropriate journal entry to record Alsup's 2018 income taxes, Alsup’s 2019 income taxes and Alsup’s 2020 income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousands.)

Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2020–2023 are as follows:

There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 25%.

(Hint: You will find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2020–2023.)

Required:
1. to 3. Prepare the appropriate journal entries to record Alsup's 2021 income taxes, 2022 income taxes and 2023 income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)