M18-4 In accounting for a long-term construction contract for which there is a projected profit, the balance in the construction-in-progress asset account at the end of the first year of work using the completed-contract method would be a. Zero b. The same as the percentage-of-completion method c. Lower than the percentage-of-completion method d. Higher than the percentage-of-completion method

M18-4 In accounting for a long-term construction contract for which there is a projected profit, the balance in the construction-in-progress asset account at the end of the first year of work using the completed-contract method would be a. Zero b. The same as the percentage-of-completion method c. Lower than the percentage-of-completion method d. Higher than the percentage-of-completion method

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 12.2.2P: Differential analysis report for machine replacement proposal Catalina Tooling Company is...

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Using the percentage-of-completion method, calculate the estimated gross profit that would be recognized during each year of the construction period. (Do not leave any answer field blank. Enter 0 for amounts.) Using the completed-contract method, calculate the estimated gross profit that would be recognized during each year of the construction period. (Do not leave any answer field blank. Enter 0 for amounts.)
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Widjaja Company is accounting for a long-term construction contract using the percentage-of-completion method. It is a 4-year contract that is currently in its second year. The latest estimates of total contract costs indicate that the contract will be completed at a profit to Widjaja Company. Instructions a. What theoretical justification is there for Widjaja Company's use of the percentage-of-completion method? b. How would progress billings be accounted for? Include in your discussion the classification of progress billings in Widjaja Company financial statements. c. How would the income recognized in the second year of the 4-year contract be determined using the cost-to-cost method of determining percentage of completion? d. What would be the effect on earnings per share in the second year of the 4-year contract of using the percentage-of-completion method instead of the completed-contract method? Discuss.
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Differential analysis report for machine replacement proposal Catalina Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Annual nonmanufacturing operating expenses and revenue are not expected to be affected by the purchase of the new machine. Instructions List other factors that should be considered before a final decision is reached.
In accounting for a long-term construction contracts, using percentage-of-completion (over time) method, the amount of construction in progress account: a. Is the same with the total revenue recognized.b. Is equal to the gross profit for the year plus the actual cost incurred.c. Total contract price multiplied by the percentage of completion.d. All of the choices
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