In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

Ellie Mosk, CEO of X-Space Industries, decided to expand the company’s product offering beyond the core model rocket business. After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging. Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share of the sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer profitability: Activity Cost Driver Total Cost Sales visits Sales visit days $ 485,000 Product modifications Number of modifications 261,000 Phone calls Number of minutes 92,100 E-mail/electronic communications Number of communications 163,000 $ 1,001,100 Customer Revenue Gross Profit Visit Days Modifications Phone Minutes Electronic Communications A $ 399,000 $ 149,000 15 15 1,040 625 B 499,000 199,000 25 15 1,130 875 C 599,000 229,000 40 40 1,380 1,010 D 1,010,000 419,000 90 60 1,730 2,010 E 1,490,000 589,000 100 70 2,130 2,260 Totals $ 3,997,000 $ 1,585,000 270 200 7,410 6,780 Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis.

Spiceland Intermediate Accounting,

Presented below are the 2018 income statement and comparative balance sheets for Santana Industries. SANTANA INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in thousands)

Sales revenue $ 18,050

Service revenue 7,200

Total revenue $ 25,250

Operating expenses:

Cost of goods sold 9,100

Selling 4,300

General and administrative 3,400

Total operating expenses 16,800

Operating income 8,450

Interest expense 390

Income before income taxes 8,060

Income tax expense 4,400

Net income $ 3,660

Balance Sheet Information ($ in thousands) Dec. 31, 2018

Dec. 31, 2017 Assets:

Cash $ 9,250 $ 3,910

Accounts receivable 6,300 4,100

Inventory 7,800 4,900

Prepaid rent 340 680

Plant and equipment 18,300 15,800

Less: Accumulated depreciation (7,000 ) (6,400 )

Total assets $ 34,990 $ 22,990

Liabilities and Shareholders’ Equity:

Accounts payable $ 5,200 $ 3,000

Interest payable 290 0

Deferred service revenue 1,180 790

Income taxes payable 740 1,180

Loan payable (due 12/31/2020) 8,800 0

Common stock 11,900 11,900

Retained earnings 6,880 6,120

Total liabilities and shareholders' equity $ 34,990 $ 22,990

Additional information for the 2018 fiscal year ($ in thousands):

1. Cash dividends of $2,900 were declared and paid.

2. Equipment costing $7,800 was purchased with cash.

3. Equipment with a book value of $2,400 (cost of $5,300 less accumulated depreciation of $2,900) was sold for $2,400.

4. Depreciation of $3,500 is included in operating expenses.

Required: Prepare Santana Industries' 2018 statement of cash flows, using the indirect method to present cash flows from operating activities.

Ellie Mosk, CEO of X-Space Industries, decided to expand the company’s product offering beyond the core model rocket business. After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging. Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share of the sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer profitability:

Required:

1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers.

2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis.

Ellie Mosk, CEO of X-Space Industries, decided to expand the company’s product offering beyond the core model rocket business. After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging. Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share of the sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer profitability: Activity Cost Driver Total Cost Sales visits Sales visit days $ 478,000 Product modifications Number of modifications 268,000 Phone calls Number of minutes 92,800 E-mail/electronic communications Number of communications 170,000 $ 1,008,800 Customer Revenue Gross Profit Visit Days Modifications Phone Minutes Electronic Communications A $ 392,000 $ 142,000 15 15 1,110 625 B 492,000 192,000 25 15 1,200 875 C 592,000 222,000 40 40 1,450 1,080 D 1,080,000 412,000 90 60 1,800 2,080 E 1,420,000 582,000 100 70 2,200 2,330 Totals $ 3,976,000 $ 1,550,000 270 200 7,760 6,990 Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis.

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows: 2018 2019 2020 Cost incurred during the year $ 2,604,000 $ 4,032,000 $ 1,940,400 Estimated costs to complete as of year-end 5,796,000 1,764,000 0 Billings during the year 2,040,000 4,596,000 3,364,000 Cash collections during the year 1,820,000 4,000,000 4,180,000 Westgate recognizes revenue over time according to percentage of completion. Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred). 2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred). 2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred). 3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract. 4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. 2018 2019 2020 Cost incurred during the year $ 2,604,000 $ 3,820,000 $ 3,220,000 Estimated costs to complete as of year-end 5,796,000 3,120,000 0 5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. 2018 2019 2020 Cost incurred during the year $ 2,604,000 $ 3,820,000 $ 3,960,000 Estimated costs to complete as of year-end 5,796,000 4,140,000 0

Sonia Inc. entered into a contract with Lala Inc. on July 1, 2018 to construct an office building. The total contract price for construction of the building is $400,000. The building was completed on December 31, 2020. Sonia’s fiscal year end is December 31.

Below is related information of Sonia Inc. regarding this construction:

Please answer each of the following questions and clearly label which question you are answering. You can prepare it in Word, in Excel, or handwrite it. Once completed, upload the completed Word or Excel document or a picture of the handwritten work (22 points).

Please use the percentage-of-completion method for items 1-5.

1. Prepare journal entries for the actual construction costs incurred and billings made in 2018. (4 points)

1. Calculate the amount of revenue and gross profit or loss to be recognized in 2018. Please show supporting calculations. (5 points)

1. Prepare the adjusting journal entry for 2018 to record revenue recognition and gross profit/loss. (3 points)

1. Prepare a partial balance sheet for 2018 relating to the contract. You do NOT need to include Cash and Accounts Receivable in your answer. Be sure to indicate whether an item is an asset or liability. Please show supporting calculations. (3 points)

1. Calculate the amount of revenue and gross profit or loss to be recognized in 2019. Please show supporting calculations. If needed, round the percentage calculation to the fourth decimal (e.g. 22.36%) and round the dollar amount to the whole dollar. (5 points)

Please use the completed contract method for item 6.

1. Using the completed contract method, how much revenue would be recognized in 2018? (2 points)

Multiple-Product Break-even, Break-Even Sales Revenue

Cherry Blossom Products Inc. produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Cherry Blossom Products sold 13,500 DVDs and 4,500 equipment sets. Information on the two products is as follows:

Total fixed cost is $77,270.

Suppose that in the coming year, the company plans to produce an extra-thick yoga mat for sale to health clubs. The company estimates that 9,000 mats can be sold at a price of $17 and a variable cost per unit of $11. Total fixed cost must be increased by $25,750 (making total fixed cost $103,020). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.

Part 1: Sales Mix Instructions and Part 2: Break-Even

1. What is the sales mix of DVDs, equipment sets, and yoga mats?
3:1:2

2. Compute the break-even quantity of each product.

3b. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. (Note: Round the contribution margin ratio to the nearest whole percent; round the break-even sales revenue to the nearest dollar.)

4. Compute the margin of safety for the coming year in sales dollars.
$

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

Data concerning the pizzeria’s costs appear below:

In November, the pizzeria budgeted for 1,680 pizzas at an average selling price of $19 per pizza and for 180 deliveries.

Data concerning the pizzeria’s operations in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.

Question 3

The Fly-High Airplane Company builds small jet airplanes to sell to corporations for use by their executives. To meet the needs of these executives, the company's customers sometimes order a custom design of the airplanes being purchased. When this occurs, a substantial start-up cost is incurred to initiate the production of these airplanes.

Fly-High has recently received purchase requests from three customers with short deadlines. However, because the company's production facilities already are almost completely tied up filling previous orders, it will not be able to accept all three orders. Therefore, a decision now needs to be made on the number of airplanes the company will agree to produce (if any) for each of the three customers.

The relevant data are given in the table below. The first row gives the start-up cost required to initiate the production of the airplanes for each customer. Once production is under way, the marginal net revenue from each airplane produced is shown in the second row. The marginal net revenue is the purchase price minus the marginal production cost. The third row gives the percentage of the available production capacity that would be used for each plane produced. The last row indicates the maximum number of airplane requested by each customer (but less will be accepted).

Fly-High now wants to determine how many airplanes to produce for each customer (if any) to maximize the company's total profit (total net revenue minus start-up costs). Formulate the mixed integer programming model and solve it using Excel solver for this problem.