Circus City issued an 8%, 10-year $2,000,000 bond to build a monorail mass transit system

Problem 18-13 Preparing Government-wide Financial Statements

Circus City issued an 8%, 10-year $2,000,000 bond to build a monorail mass transit system. The city received $1,754,217 cash from the bond issuance on January 1, 2008. The bond yield is 10%. Interest is paid annually on December 31 of each year. Disclosure information about capital assets is reported below.

AND SO ON

Required:
Using the information above, prepare the statement of activities and the statement of net assets on a government-wide basis (using full accrual accounting). The beginning fund balance in the government-wide Statement of Net Assets is $2,686,283.

Click here for the solution: Circus City issued an 8%, 10-year $2,000,000 bond to build a monorail mass transit system

On March 1, 2007, Winter Company entered into a contract to build an apartment building

On March 1, 2007, Winter Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,000,000 and will take 3 years to complete. The contract price was $3,000,000 The information that follows pertains to the construction period:

2007 2008 2009
Costs to date: $600,000 $1,560,000 $2,100,000
Estimated costs to complete: 1,400,000 390,000 0
Progress billing to date: 1,050,000 2,100,000 3,000,000
Cash collected to date: 950,000 1,950,000 2,750,000

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 2009.
(c) Prepare a partial balance sheet for December 31, 2008, showing the balances in the receivables and inventory accounts.


Click here for the solution: On March 1, 2007, Winter Company entered into a contract to build an apartment building

On March 1, 2010, Chance Company entered into a contract to build an apartment building

P18-3 (Recognition of Profit and Entries on Long-Term Contract) On March 1, 2010, Chance Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,000,000 and will take 3 years to complete. The contract price was $3,000,000. The following information pertains to the construction period:

2010 2011 2012
Costs to date: $600,000 $1,560,000 $2,100,000
Estimated costs to complete: 1,400,000 520,000 0
Progress billing to date: 1,050,000 2,000,000 3,000,000
Cash collected to date: 950,000 1,950,000 2,850,000

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 2012.
(c) Prepare a partial balance sheet for December 31, 2011, showing the balances in the receivables and inventory accounts.


Click here for the solution: On March 1, 2010, Chance Company entered into a contract to build an apartment building

Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications

Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications. Upon completion of the engines, Winston has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2011, and requires annual rental payments of $413,971 each January 1, starting January 1, 2011. Winston’s incremental borrowing rate is 10%. The implicit interest rate used by Ewing Inc. and known to Winston is 8%. The total cost of building the three engines is $2,600,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Winston depreciates similar equipment on a straight-line basis. At the end of the lease, Winston assumes title to the engines. Collectibility of the lease payments is reasonably certain; no uncertainties exist relative to un-reimbursable lessor costs.

(Round all numbers to the nearest dollar.)
(a) Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor.
(b) Prepare the journal entry or entries to record the transaction on January 1, 2011, on the books of Winston Industries.
(c) Prepare the journal entry or entries to record the transaction on January 1, 2011, on the books of Ewing Inc.
(d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2011.
(e) Prepare the journal entries for both the lessee and lessor to record interest expense (revenue) at December 31, 2011. (Prepare a lease amortization schedule for 2 years.)
(f) Show the items and amounts that would be reported on the balance sheet (not notes) at December 31, 2011, for both the lessee and the lessor.


Click here for the solution: Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications

On July 1, 2010, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000

P18-7 (Long-Term Contract with an Overall Loss) On July 1, 2010, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2012, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2010, 2011, and 2012.

At At At
12/31/10 12/31/11 12/31/12
Contract costs incurred to date $ 300,000 $1,200,000 $2,100,000
Estimated costs to complete the contract 1,200,000 800,000 –0–
Billings to Gumbel 300,000 1,100,000 1,850,000

Instructions
(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)
(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)

Click here for the solution: On July 1, 2010, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000

Tinker Construction had a contract with Scroge to build a factory addition for Scroge by a particular date

Tinker Construction had a contract with Scroge to build a factory addition for Scroge by a particular date. The contract contained a penalty clause exacting daily penalties for late performance, and Tinker was working hard to complete the building on time. Because prompt completion of the addition was so important to Scroge, however, Scroge offered Tinker a bonus if it completed the factory addition on time. Scroge also learned that the supplier of parts for machinery that he had contracted for had called and said that it could not deliver the parts on Scroge’s schedule for the price it had agreed to. Because there was no other supplier, Scroge promised to pay the requested higher price. The factory addition was completed on time and the parts arrived on time. Scroge then refused to pay both the bonus to Tinker and the higher price for the parts. Were these promises enforceable?

Click here for the solution: Tinker Construction had a contract with Scroge to build a factory addition for Scroge by a particular date

Green Co. has signed a long-contract to build a new sports arena

Green Co. has signed a long-contract to build a new sports arena. The total revenue related to the contract is $520 million. Estimated costs for the building the arena are $180 million in the first year and $130 million in both the second and third year. The costs cannot be reasonably estimated. How much revenue should Green Co. report in their first year under iGAAP.

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On July 1, 2007, Kyung-wook Construction Company Inc. contracted to build an office building for Mingxia Corp. for a total contract price of $1,950,000

Problem 18-7 (P18-7) (Long-Term Contract with an Overall Loss) On July 1, 2007, Kyung-wook Construction Company Inc. contracted to build an office building for Mingxia Corp. for a total contract price of $1,950,000. On July 1, Kyung-wook estimated that it would take between 2 and 3 years to complete the building. On December 31, 2009, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Mingxia for 2007, 2008, and 2009.

At At At
12/31/07 12/31/08 12/31/09
Contract costs incurred to date $ 150,000 $1,200,000 $2,100,000
Estimated costs to complete the contract 1,350,000 800,000 –0–
Billings to Mingxia 300,000 1,100,000 1,850,000

 Instructions
(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2007, 2008, and 2009. (Ignore income taxes.)
(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 2007, 2008, and 2009. (Ignore income taxes.)

Click here for the solution: On July 1, 2007, Kyung-wook Construction Company Inc. contracted to build an office building for Mingxia Corp. for a total contract price of $1,950,000