The Pyramid Construction Company has used the completed-contract method of accounting for construction contracts

P 20-2 Change in principle; change in method of accounting for long-term construction

The Pyramid Construction Company has used the completed-contract method of accounting for construction contracts during its first two years of operation, 2009 and 2010. At the beginning of 2011, Pyramid decided to change to the percentage-of-completion method for both tax and financial reporting purposes. The following table presents information concerning the change for 2009–2011. The income tax rate for all years is 40%.

Pyramid issued 50,000 $1 par, common shares for $230,000 when the business began, and there have been no changes in paid-in capital since then. Dividends were not paid the first year, but $10,000 cash dividends were paid in both 2010 and 2011.

Required:
1. Prepare the journal entry to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.)
2. Prepare the 2011–2010 comparative income statements beginning with income before income taxes.
3. Prepare the 2011–2010 comparative statements of shareholders' equity. (Hint: The 2009 statements reported retained earnings of $36,000. This is $60,000 − [$60,000 × 40%].


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The futures price of corn is $2.00

The futures price of corn is $2.00. The contracts are for 10,000 bushels, so a contract is worth $20,000. The margin requirement is $2,000 a contract, and the maintenance margin requirement is $1,200. A speculator expects the price of the corn to fall and enters into a contract to sell corn.

a. How much must the speculator initially remit?
b. If the futures price rises to $2.13, what must the spectator do?
c. If the futures price continues to rise to $2.14, how much does the speculator have in the account?

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The futures price of British pounds is $2.00

The futures price of British pounds is $2.00. Futures contracts are for 10,000, so a contract is worth $20,000. The margin requirement is $2,000 a contract and the maintenance market requirement is $1,200. A speculator expects the price of the pound to fall and enters into a contract to sell pounds.
a. How much must the speculator initially remit?
b. If the futures price rises to $2.13, what must the speculator do?
c. If the futures price continues to rise to $2.14, how much does the speculator have in the account?

Click here for the solution: The futures price of British pounds is $2.00

The futures price of gold is $1,050

The futures price of gold is $1,050. Futures contracts are for 100 ounces of gold, and the margin requirement is $5,000 a contract. The maintenance margin requirement is $1,500. You expect the price of gold to rise and enter into a contract to buy gold.

a. How much must you initially remit?
b. If the futures price of gold rises to $1,055, what is the profit and percentage return on your investment?
c. If the futures price of gold declines to $1,048 what is the loss and percentage return on the position?
d. If the futures price falls to $1,038, what must you do?
e. If the futures price continues to decline to $1,010, how much do you have in your account?
f. How do you close your position?

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ACC 421 Week 3 During 2007 Pierson Company started a construction job with a contract price of $1,500,000

ACC 421 Week Three (Week 3)

Exercise 18-4 (E18-4) (Recognition of Profit on Long-Term Contracts) During 2007 Pierson Company started a construction job with a contract price of $1,500,000. The job was completed in 2009. The following information is available.

2007 2008 2009
Costs incurred to date $400,000 $935,000 $1,070,000
Estimated costs to complete 600,000 165,000 –0–
Billings to date 300,000 900,000 1,500,000
Collections to date 270,000 810,000 1,425,000

Instructions
(a) Compute the amount of gross profit to be recognized each year assuming the percentage-of-completion method is used.
(b) Prepare all necessary journal entries for 2008.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.

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