P2-3A Enos Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2008, the general ledger for Enos Inc. contains the following data.
Raw Materials Inventory $4,200
Work in Process Inventory $5,540
Manufacturing Overhead Applied (during the month) $32,640
Manufacturing Overhead Incurred (during the month) $31,650
Subsidiary data for Work in Process Inventory on June 1 are as follows.
Job Cost Sheets
Customer Job
Cost Element Fowler (No.101) Haines (No.102) Krantz (No.103)
Direct materials $ 600 $ 800 $ 900
Direct labor 320 540 580
Manufacturing overhead 400 675 725
$1,320 $2,015 $2,205
During June, raw materials purchased on account were $3,900, and all wages were paid. Additional overhead costs consisted of depreciation on equipment $700 and miscellaneous costs of $400 incurred on account.
A summary of materials requisition slips and time tickets for June shows the following.
Customer Job Materials
Requisition Slips Time Tickets
Fowler (No.101) $ 800 $ 450
Elgin (No.104) 2,000 800
Haines (No.102) 500 360
Krantz (No.103) 1,300 1,600
Fowler (No.101) 300 390
4,900 3,600
Indirect materials 1,500 1,200
$6,400 $4,800
Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor cost. The patios for customers Fowler (No.101), Haines (No.102), and Krantz (No.103) were completed during June and sold for a total of $18,900. Each customer paid in full.
Required:
a) Journalize the June transactions: (i) for purchase of raw materials, factory labor costs incurred, and manufacturing overhead costs incurred; (ii) assignment of direct materials, labor, and overhead to production; and (iii) completion of jobs and sale of goods.
b) Post the entries to Work in Process Inventory.
c) Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs.
d) Prepare a cost of goods manufactured schedule for June.
Click here for the solution: Enos Inc. is a construction company specializing in custom patios
Showing posts with label construction. Show all posts
Showing posts with label construction. Show all posts
Monday, October 26, 2015
Tuesday, September 8, 2015
Abraham Company completed the construction of a building at a cost of $2,242,000 and first occupied it in January 1984
Abraham Company completed the construction of a building at a cost of $2,242,000 and first occupied it in January 1984. It was estimated that the building will have a useful life of 40 years and a salvage value of $70,800 at the end of that time.
Early in 1994, an addition to the building was constructed at a cost of $554,600. At the 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 $23,600.
In 2012, it is determined that the probable life of the building and addition will extend to the end of 2043 or 20 years beyond the original estimate.
a) Using the straight-line method, compute the annual depreciation that would have been charged from 1984 through 1993
b) Compute the annual depreciation that would have been charged from 1994 through 2011
c) Is an entry necessary to adjust the account balances because of the revision of the estimated life in 2012?
d) Compute the annual depreciation to be charged beginning with 2012
Click here for the solution: Abraham Company completed the construction of a building at a cost of $2,242,000 and first occupied it in January 1984
Early in 1994, an addition to the building was constructed at a cost of $554,600. At the 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 $23,600.
In 2012, it is determined that the probable life of the building and addition will extend to the end of 2043 or 20 years beyond the original estimate.
a) Using the straight-line method, compute the annual depreciation that would have been charged from 1984 through 1993
b) Compute the annual depreciation that would have been charged from 1994 through 2011
c) Is an entry necessary to adjust the account balances because of the revision of the estimated life in 2012?
d) Compute the annual depreciation to be charged beginning with 2012
Click here for the solution: Abraham Company completed the construction of a building at a cost of $2,242,000 and first occupied it in January 1984
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%].
Click here for the solution: The Pyramid Construction Company has used the completed-contract method of accounting for construction contracts
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%].
Click here for the solution: The Pyramid Construction Company has used the completed-contract method of accounting for construction contracts
Sunday, September 6, 2015
On July 1, 2011, Apache Company sold a parcel of undeveloped land to a construction company for $3,000,000
BE 5-1 On July 1, 2011, Apache Company sold a parcel of undeveloped land to a construction company for $3,000,000. The book value of the land on Apache's books was $1,200,000. Terms of the sale required a down payment of $150,000 and 19 annual payments of $150,000 plus interest at an appropriate interest rate due on each July 1 beginning in 2012. Apache has no significant obligations to perform services after the sale. How much gross profit will Apache recognize in both 2011 and 2012 applying the cost recovery method?
Click here for the solution: On July 1, 2011, Apache Company sold a parcel of undeveloped land to a construction company for $3,000,000
Click here for the solution: On July 1, 2011, Apache Company sold a parcel of undeveloped land to a construction company for $3,000,000
Saturday, August 22, 2015
Frank Lou had recently been promoted to construction manager at a development firm
Fraud Case 14-1 Frank Lou had recently been promoted to construction manager at a development firm. He was responsible for dealing with contractors who were bidding on a multi-million dollar excavation job for the new high-rise. Times were tough, several contractors had gone under recently, and the ones left standing were viciously competitive. That morning, four bids were sitting on Frank’s desk. The deadline was midnight, and the bids would be opened the next morning. The first bidder, Bo Freely, was a tough but personable character that Frank had known for years. Frank had lunch with him today, and after a few beers, Bo hinted that if Frank "inadvertently" mentioned the amount of the lowest bid, he'd receive a "birthday card" with a gift of cash. After lunch, Frank carefully unsealed the bids and noticed that another firm had underbid Bo's company by a small margin. Frank took Bo's bid envelope, wrote the low bid amount in pencil on it, and carried it downstairs where Bo's son William was waiting. Later that afternoon, a new bid came in from Bo's company. The next day, Bo's company got the job, and Frank got a birthday card in his mailbox.
Requirements
• Was Frank's company hurt in any way by this fraudulent action?
• How could this action hurt Frank?
• How can a business protect against this kind of fraud?
Click here for the solution: Frank Lou had recently been promoted to construction manager at a development firm
Requirements
• Was Frank's company hurt in any way by this fraudulent action?
• How could this action hurt Frank?
• How can a business protect against this kind of fraud?
Click here for the solution: Frank Lou had recently been promoted to construction manager at a development firm
Monday, August 17, 2015
On December 31, 2011, Hurston Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building
E10-8 (Capitalization of Interest) On December 31, 2011, Hurston Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2012, the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; December 1, $1,200,000. Additional information is provided as follows.
1. Other debt outstanding
10-year, 11% bond, December 31, 2005, interest payable annually $4,000,000
6-year, 10% note, dated December 31, 2009, interest payable annually $1,600,000
2. March 1, 2012, expenditure included land costs of $150,000
3. Interest revenue earned in 2012 $49,000
Instructions
(a) Determine the amount of interest to be capitalized in 2012 in relation to the construction of the building.
(b) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2012.
Click here for the solution: On December 31, 2011, Hurston Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building
1. Other debt outstanding
10-year, 11% bond, December 31, 2005, interest payable annually $4,000,000
6-year, 10% note, dated December 31, 2009, interest payable annually $1,600,000
2. March 1, 2012, expenditure included land costs of $150,000
3. Interest revenue earned in 2012 $49,000
Instructions
(a) Determine the amount of interest to be capitalized in 2012 in relation to the construction of the building.
(b) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2012.
Click here for the solution: On December 31, 2011, Hurston Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building
Saturday, August 1, 2015
Leoni Co. receives $240,000 when it issues a $240,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2011
E10-15 Leoni Co. receives $240,000 when it issues a $240,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2011. The terms provide for semiannual installment payments of $20,000 on June 30 and December 31.
Prepare the journal entries to record the mortgage loan and the first two installment payments.
Click here for the solution: Leoni Co. receives $240,000 when it issues a $240,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2011
Prepare the journal entries to record the mortgage loan and the first two installment payments.
Click here for the solution: Leoni Co. receives $240,000 when it issues a $240,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2011
During 2010 Nilsen Company started a construction job with a contract price of $1,600,000
E18-4 (Recognition of Profit on Long-Term Contracts) During 2010 Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2012. The following information is available.
2010 2011 2012
Costs incurred to date $400,000 $825,000 $1,070,000
Estimated costs to complete 600,000 275,000 –0–
Billings to date 300,000 900,000 1,600,000
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 2011.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.
Click here for the solution: During 2010 Nilsen Company started a construction job with a contract price of $1,600,000
2010 2011 2012
Costs incurred to date $400,000 $825,000 $1,070,000
Estimated costs to complete 600,000 275,000 –0–
Billings to date 300,000 900,000 1,600,000
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 2011.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.
Click here for the solution: During 2010 Nilsen Company started a construction job with a contract price of $1,600,000
In 2010, Steinrotter Construction Corp. began construction work under a 3-year contract
E18-5 (Analysis of Percentage-of-Completion Financial Statements) In 2010, Steinrotter Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Steinrotter uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2010, follow.
Balance Sheet
Accounts receivable-construction contract billings $18,000
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500
Income Statement
Income (before tax) on the contract recognized in 2010 $19,500
Instructions
(a) How much cash was collected in 2010 on this contract?
(b) What was the initial estimated total income before tax on this contract?
Click here for the solution: In 2010, Steinrotter Construction Corp. began construction work under a 3-year contract
Balance Sheet
Accounts receivable-construction contract billings $18,000
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500
Income Statement
Income (before tax) on the contract recognized in 2010 $19,500
Instructions
(a) How much cash was collected in 2010 on this contract?
(b) What was the initial estimated total income before tax on this contract?
Click here for the solution: In 2010, Steinrotter Construction Corp. began construction work under a 3-year contract
Tuesday, July 14, 2015
Nomar Industries, Inc. operates in several lines of business, including the construction and real estate industries
Nomar Industries, Inc. operates in several lines of business, including the construction and real estate industries. While the majority of its revenues are recognized at point of sale, Nomar appropriately recognizes revenue long-term construction contracts using the percentage-complete method. It recognizes sales of some properties using the installment-sales approach. Income data for 2013 from operations other than construction and real estate are as follows:
Revenues 5,500,000
Expenses 4,200,000
1. Nomar started a construction project during 2012. The total contract price is 500,000, and 100,000 in costs were incurred in 2013. Estimated costs to complete the project in 2014 are 200,000. In 2012 Nomar incurred 100,000 of costs and recognized 25,000 gross profit on this project. Total billings at the end of 2013 were 230,00, and total cash collected as the end of 2013 was 202,500.
2. During this year, Nomar sold real estate parcels at a price of 480,000. Nomar recognizes gross profit at an 18% rate when cash is received. Nomar collected 220,000 during the year on these sales.
Solve
A) Determine net income for Nomar for 2013. Ignore income taxes.
B) Prepare the journal entries to record the costs incurred and gross profit recognized in 2013 on the construction project.
C) For 2013, show how the details related to this construction contract would be disclosed on the balance sheet.
D) Nomar is negotiating real estate sales with some new customers which are more uncertain as to the customers’ ability to make all payments. Is there a more appropriate revenue recognition policy for these customers? Explain.
Click here for the solution: Nomar Industries, Inc. operates in several lines of business, including the construction and real estate industries
Revenues 5,500,000
Expenses 4,200,000
1. Nomar started a construction project during 2012. The total contract price is 500,000, and 100,000 in costs were incurred in 2013. Estimated costs to complete the project in 2014 are 200,000. In 2012 Nomar incurred 100,000 of costs and recognized 25,000 gross profit on this project. Total billings at the end of 2013 were 230,00, and total cash collected as the end of 2013 was 202,500.
2. During this year, Nomar sold real estate parcels at a price of 480,000. Nomar recognizes gross profit at an 18% rate when cash is received. Nomar collected 220,000 during the year on these sales.
Solve
A) Determine net income for Nomar for 2013. Ignore income taxes.
B) Prepare the journal entries to record the costs incurred and gross profit recognized in 2013 on the construction project.
C) For 2013, show how the details related to this construction contract would be disclosed on the balance sheet.
D) Nomar is negotiating real estate sales with some new customers which are more uncertain as to the customers’ ability to make all payments. Is there a more appropriate revenue recognition policy for these customers? Explain.
Click here for the solution: Nomar Industries, Inc. operates in several lines of business, including the construction and real estate industries
Monday, July 6, 2015
Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012
Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012. The company expected to operate the department at 100% of normal capacity of 7,000 hours.
Variable Costs:
Indirect factory wages $22,050
Power and light 12,600
Indirect Materials 10,500
Total Variable Cost $45,150
Fixed Costs:
Supervisory salaries $12,000
Depreciation of plant and equipment 31,450
Insurance and property taxes 9,750
Total fixed costs $53,200
Total factory overhead $98,350
During May, the department operated at 7,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $23,580; power and light, $13,120; indirect materials, $11,310; supervisory salaries, $12,000; depreciation of plant and equipment, $31,450; and insurance and property taxes, $9,750.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 7,400 hours.
Click here for the solution: Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012
Variable Costs:
Indirect factory wages $22,050
Power and light 12,600
Indirect Materials 10,500
Total Variable Cost $45,150
Fixed Costs:
Supervisory salaries $12,000
Depreciation of plant and equipment 31,450
Insurance and property taxes 9,750
Total fixed costs $53,200
Total factory overhead $98,350
During May, the department operated at 7,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $23,580; power and light, $13,120; indirect materials, $11,310; supervisory salaries, $12,000; depreciation of plant and equipment, $31,450; and insurance and property taxes, $9,750.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 7,400 hours.
Click here for the solution: Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012
Tuesday, June 23, 2015
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.
Click here for the solution: (Recognition of Profit on Long-Term Contracts) During 2007 Pierson Company started a construction job with a contract price of $1,500,000
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.
Click here for the solution: (Recognition of Profit on Long-Term Contracts) During 2007 Pierson Company started a construction job with a contract price of $1,500,000
Wednesday, June 17, 2015
(Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract
ACC 421 Week 3
Exercise 18-5 (E18-5) (Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Beth Botsford uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2007, follow.
Balance Sheet
Accounts receivable—construction contract billings $21,500
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500
Income Statement
Income (before tax) on the contract recognized in 2007 $18,200
Instructions
(a) How much cash was collected in 2007 on this contract?
(b) What was the initial estimated total income before tax on this contract?
Click here for the solution: (Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract
Exercise 18-5 (E18-5) (Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Beth Botsford uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2007, follow.
Balance Sheet
Accounts receivable—construction contract billings $21,500
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500
Income Statement
Income (before tax) on the contract recognized in 2007 $18,200
Instructions
(a) How much cash was collected in 2007 on this contract?
(b) What was the initial estimated total income before tax on this contract?
Click here for the solution: (Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract
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