Rasher Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract provided for progress payments. RCL's accountingyear ends December 31. Work began under the contract on August 1, 2017, and was completed on October 31, 2019. Construction activities are summarizedbelow:20172018450,000190,000535,500375,0002019Construction costs incurred during the year 180,000Estimated remaining costs to completeProgress Billings to dateCash Collections to date195,000630,000153,000140,000975,000450,000REQUIRED1. Record RCL's journal entries assuming that the percentage-of-completion method is used. Assume that the percentage of completion is measured by theratio of costs incurred to date divided by total estimated construction costs.2. Complete the following table for RCL using the percentage-of-completion method (as of and for the year ended December 31):201720182019Accounts ReceivableCIP InventoryBillings on ContractCost in excess of billingsConstruction RevenueCosts of ConstructionGross Profit3. How could management of RCL manipulate the accounting for this construction contract in order to achieve its motivation of maximizing net income (e.g. toearn a bigger bonus) in the earlier years?

Date Particulars L/f Debit Credit 2017 Construction in progress $180,000 To…

Rasher Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract provided for progress payments. RCL's accounting year ends December 31. Work began under the contract on August 1, 2017, and was completed on October 31, 2019. Construction activities are summarized below: 2017 2019 Construction costs incurred during the year Estimated remaining costs to complete Progress Billings to date Cash Collections to date 180,000 630,000 153,000 140,000 2018 450,000 190,000 535,500 375,000 195,000 975,000 450,000 REQUIRED

Rasher Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract provided for progress payments. RCL's accounting year ends December 31. Work began under the contract on August 1, 2017, and was completed on October 31, 2019. Construction activities are summarized below: 2017 2019 Construction costs incurred during the year Estimated remaining costs to complete Progress Billings to date Cash Collections to date 180,000 630,000 153,000 140,000 2018 450,000 190,000 535,500 375,000 195,000 975,000 450,000 REQUIRED

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 18RE

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The following are independent errors: a. In January 2019, repair costs of 9,000 were debited to the Machinery account. At the beginning of 2019, the book value of the machinery was 100,000. No residual value is expected, the remaining estimated life is 10 years, and straight-line depreciation is used. b. All purchases of materials for construction contracts still in progress have been immediately expensed. It is discovered that the use of these materials was 10,000 during 2018 and 12,000 during 2019. c. Depreciation on manufacturing equipment has been excluded from manufacturing costs and treated as a period expense. During 2019, 40,000 of depreciation was accounted for in that manner. Production was 15,000 units during 2019, of which 3,000 remained in inventory at the end of the year. Assume there was no inventory at the beginning of 2019. Required: Prepare journal entries for the preceding errors discovered during 2020. Ignore income taxes.
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Worksheet Devlin Company has prepared the following partially completed worksheet for the year ended December 31, 2019: The following additional information is available: (a) salaries accrued but unpaid total 250; (b) the 80 heat and light bill for December has not been recorded or paid; (c) depreciation expense totals 810 on the buildings and equipment; (d) interest accrued on the note payable totals 380 (this will be paid when the note is repaid); (e) the company leases a portion of its floor space to KT Daniel Specialty Company for 50 per month, and KT Daniel has not yet paid its December rent; (f) interest accrued on the note receivable totals 80; (g) bad debts expense is 70; and (h) the income tax rate is 30% on current income and is payable in the first quarter of 2017. Required: 1. Complete the worksheet. (Round to the nearest dollar.) 2. Prepare the companys financial statements. 3. Prepare (a) adjusting and (b) closing entries in the general journal.
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?