Baird Bros. Construction is considering the purchase of a machine at a cost of $203,000. The machine is expected to generate cash flows of $38,000 per year for 10 years and can be sold at the end of 10 years for $28,000. Interest is at 12%. Assume the machine purchase would be paid for on the first day of year one, but that all other cash flows occur at the end of the year. Ignore income tax considerations. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required: a. What is the net present value of the cash flows?

b. Determine if Baird should purchase the machine. Yes No

In 1990, Flounder Company completed the construction of a building at a cost of $2,300,000 and first occupied it in January 1991. It was estimated that the building will have a useful life of 40 years and a salvage value of $69,000 at the end of that time.

Early in 2001, an addition to the building was constructed at a cost of $575,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $23,000.

In 2019, it is determined that the probable life of the building and addition will extend to the end of 2050, or 20 years beyond the original estimate.

a) Using the straight-line method, compute the annual depreciation that would have been charged from 1991 through 2000.

b) Compute the annual depreciation that would have been charged from 2001 through 2018.

c) Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2019.

d) Compute the annual depreciation to be charged, beginning with 2019. (Round answer to 0 decimal places, e.g. 45,892.)

In 1993, Novak Company completed the construction of a building at a cost of $2,500,000 and first occupied it in January 1994. It was estimated that the building will have a useful life of 40 years and a salvage value of $76,000 at the end of that time.

Early in 2004, an addition to the building was constructed at a cost of $625,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $25,000.

In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.

(a)

Correct answer iconYour answer is correct.

Using the straight-line method, compute the annual depreciation that would have been charged from 1994 through 2003.

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(b)

• Your Answer
• Correct Answer

Compute the annual depreciation that would have been charged from 2004 through 2022.

(c)

Correct answer iconYour answer is correct.

Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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Attempts: 1 of 3 used

(d)

Compute the annual depreciation to be charged, beginning with 2022. (Round answer to 0 decimal places, e.g. 45,892.)

?

In 1993, Skysong Company completed the construction of a building at a cost of $2,120,000 and first occupied it in January 1994. It was estimated that the building will have a useful life of 40 years and a salvage value of $64,000 at the end of that time. Early in 2004, an addition to the building was constructed at a cost of $530,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $21,200. In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.

Compute the annual depreciation to be charged, beginning with 2022. (Round answer to 0 decimal places, e.g. 45,892.)

In February 2020, Cullumber Construction signed a contract and commenced construction on a parking garage. The total contract price was $89.4 million and was expected to be completed in July 2024 at a total estimated cost of $82.1 million. Payment by the customer was to be made in several stages, based on significant events and dates throughout the construction timeline. The customer was to have control over the parking garage and was able to make major changes to the project during the construction process. Cullumber’s year-end was September 30.
By the end of September, 2020, Cullumber had incurred $20,525,000 in costs and had invoiced $10,000,000 in progress billings. $7,700,000 of the progress billings had been collected.

By September 30, 2021, Cullumber had incurred $35,190,000 in total costs and had invoiced $45,900,000 in progress billings, including the progress billings in 2020. Of the total billings, $30,700,000 in total had been collected. Also, Cullumber reviewed its cost estimates on the project, and now believed the parking garage would cost $78.2 million in total to complete.

Prepare all journal entries required for the year ended September 30, 2020. Use Materials, Cash, Payables for costs incurred to date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Prepare all journal entries required for the year ended September 30, 2021. Use Materials, Cash, Payables for costs incurred to date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

ABC Construction Co. signed a $2,000,000 contract to construct an office building for the State of Arizona. The project will begin in 2017 and be completed in 2018. The cost of construction is expected to be $1,875,000.

Below is a summary of events for 2017 and 2018:

ABC Construction Co. recognizes revenue upon completion when accounting for long-term contracts.

a. Prepare all journal entries to record costs, billings, collections, and any profit recognition for ABC Construction Co. activities for 2017 only.

b. Prepare any journal entry needed for profit recognition only for ABC Construction Co. activities for 2018.

7. On January 1, 2017, Spartan Company signed a $240 million contract with the City of Amherst to construct a new city hall. Spartan expects to construct the building within two years and incur total expenses of $180 million. Spartan incurred $72 million in construction costs during 2017 and the remaining $108 million in 2018. Using the percentage-of-completion method, how much revenue should Spartan recognize in 2017?

A quality control activity analysis indicated the following four activity costs of a hotel:

Sales are $3,000,000. Prepare a cost of quality report. Round percent of sales to one decimal place.

Describe ( in details) 5 cost control techniques used by contractors in construction projects.