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 $2,624,000  $3,690,000  $2,074,600

Estimated costs to complete as of year-end 5,576,000   1,886,000 0

Billings during the year 2,200,000   4,114,000   3,686,000

Cash collections during the year 2,000,000   3,800,000   4,200,000

Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

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).

Candid, Inc., is a manufacturer of digital cameras. It has two departments: assembly and testing. In January 2020, the company incurred $800,000 on direct materials and $805,000 on conversion costs, for a total manufacturing cost of $1,605,000.

1. Assume there was no beginning inventory of any kind on January 1, 2020. During January, 5,000 cameras were placed into production and all 5,000 were fully completed at the end of the month. What is the unit cost of an assembled camera in January?
2. Assume that during February 5,000 cameras are placed into production. Further, assume the same total assembly costs for January are also incurred in February, but only 4,000 cameras are fully completed at the end of the month. All direct materials have been added to the remaining 1,000 cameras. However, on average, these remaining 1,000 cameras are only 60% completed as to conversion costs. (a) What are the equivalent units for direct materials and conversion costs and their respective costs per equivalent unit for February? (b) What is the unit cost of an assembled camera in February 2020?
3. Explain the difference in your answers to requirements 1 and 2.

Culver Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $6,000,000 on January 1, 2020. Culver expected to complete the building by December 31, 2020. Culver has the following debt obligations outstanding during the construction period.

1. Assume that Culver completed the office and warehouse building on December 31, 2020, as planned at a total cost of $6,240,000, and the weighted-average amount of accumulated expenditures was $4,320,000. Compute the avoidable interest on this project.

2. Compute the depreciation expense for the year ended December 31, 2021. Culver elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $360,000.

Rottweiler Corporation issued 100, $1,000 par value bonds on February 24, 2019. The original bonds' maturity was 20 years, and they have a six percent coupon. Rottweiler used the money to purchase 150 Really Adorable Puppies. The firm hopes to double production of Really Adorable Puppies in the next five to ten years. The company makes all payments on a semiannual basis.

1. What is the value of the bond on February 24, 2020, if the interest rate on comparable debt is 6 percent? What is the current yield? What is the yield to maturity?

2.     What is the value of the bond on February 24, 2020, if the interest on comparable debt is 10 percent? What is the current yield? What is the yield to maturity?

3.      What is the value of the bond on February 24, 2020, if the interest on comparable debt is 4 percent? What is the current yield? What is the yield to maturity?

4.     Draw the time path of value graph (be sure to label all points of interest) of a 6 percent coupon, $1,000 par value bond when interest rates are 4 percent, 6 percent, and 10 percent.

Mooney Ltd. completed the construction of an office building for £2,400,000 on December 31, 2019. The company estimated that the building would have a residual value of £0 and a useful life of 40 years. A more detailed review of the expenditures related to the building indicates that £300,000 of the total cost was used for personal property and £180,000 for land improvements. The personal property has a depreciable life of 5 years and land improvements have a depreciable life of 10 years.

Instructions

a. Compute depreciation expense for 2020 using component depreciation and the straight‐line method.

b. assume a yearly accounting period ending on 31 May 2020. Prepare the adjusting journal entry for depreciation on that date.

c. Prior to the IFRS requirement to depreciate components separately, all of the £2,400,000 may well have been depreciated using the useful life and residual value of the building. Calculate the depreciation expense for the calendar year 2020 under this scenario. Compare this with what you calculated for Instruction a). If management were opportunistic, would they have preferred the result just calculated or the result in a)? Explain why.

Sweet Construction Company began operations on January 1, 2020. During the year, Sweet Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Sweet estimated that it would take 5 years to complete the facility at a total cost of $4,517,000. The total contract price for construction of the facility is $6,047,000. During the year, Sweet incurred $1,067,800 in construction costs related to the construction project. The estimated cost to complete the contract is $4,271,200. Lundquist Corp. was billed and paid 25% of the contract price. Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2020, and the amount to be shown as “costs and recognized profit in excess of billings” or “billings in excess of costs and recognized profit” at December 31, 2020, under each of the following methods.

(a) Completed-contract method.

1.Gross Profit to be recognize

2.Computation of Billings on Uncompleted Contract in Excess of
Related Costs under Completed-Contract Method

(b) Percentage-of-completion method.

Required information

[The following information applies to the questions displayed below.]

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.

rev: 09_15_2017_QC_CS-99734

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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

Brickell Corporation purchased a new machinery at the beginning of 2020 at a cost of $200,000. The machinery is expected to have a useful life of 10 years and no residual value. The straight-line method of depreciation is used. Adverse economic conditions develop in 2022 that result in a significant decline in demand for Brickell’s products. At December 31, 2022 the company develops the following estimates related to the machinery:

• Expected future cash flows: $150,000

• PV of expected future cash flows: $110,000

• Selling price: $140,000

• Cost of disposal: $14,000

At the end of 2024, Brickell’s management determines that there has been a substantial improvement in economic outlook, resulting in a strengthening of demand for Brickell’s products. The following estimates related to the machinery are developed at December 31, 2024:

• Expected future cash flows: $140,000

• PV of expected future cash flows: $106,000

• Selling price: $100,000

• Cost of disposal: $14,000

Required:

1. Determine the carrying amounts for the machinery reported on the balance sheet at the end of years 2020-2024 and the amounts to be reported in the income statement related to the machinery for years 2020-2024.