INTERMEDIATE ACCOUNTING-MYACCOUNTINGLAB
3rd Edition
ISBN: 9780136946533
Author: GORDON
Publisher: PEARSON
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Chapter 21, Problem 21.4BE
To determine
To prepare: The
Given information:
Tax rate is 35%.
Cumulative income would have been lower by $300,000 if completed contract method was used.
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Carrboro Construction Company elected to change its method of accounting from the
percentage-of-completion method to the completed-contract method. Prior-years income
(cumulative) would have been $310,000 lower if Carrboro had always used the completed contract
method. The company is subject to a 35% tax rate. Prepare the journal entry to record the change
in method. (Record debits first, then credits. Exclude explanations from any journal entries.)
Account
Current Year
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.
Pharoah Construction Company uses the percentage-of-completion method of accounting. In 2025, Pharoah began work under a
contract with a contract price of $1,650,000. Other details follow:
Costs incurred during the year
Estimated costs to complete, as of December 31
Billings during the year
Collections during the year
(a)
Your answer is incorrect.
2025
$1,093,400
446,600
933,400
260,000
2026
$1,510,000
-0-
1,650,000
1,650,000
What portion of the total contract price would be recognized as revenue in 2025? In 2026?
Chapter 21 Solutions
INTERMEDIATE ACCOUNTING-MYACCOUNTINGLAB
Ch. 21 - Are accounting changes permitted in financial...Ch. 21 - How do firms report accounting changes under the...Ch. 21 - Prob. 21.3QCh. 21 - How do firms account for changes in accounting...Ch. 21 - Prob. 21.5QCh. 21 - Prob. 21.6QCh. 21 - Prob. 21.7QCh. 21 - Prob. 21.8QCh. 21 - Do accounting errors that self-correct within two...Ch. 21 - Does a firm need to correct an error that...
Ch. 21 - Prob. 21.1MCCh. 21 - Prob. 21.2MCCh. 21 - Prob. 21.3MCCh. 21 - Prob. 21.4MCCh. 21 - Prob. 21.5MCCh. 21 - Prob. 21.1BECh. 21 - Prob. 21.2BECh. 21 - Prob. 21.3BECh. 21 - Prob. 21.4BECh. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.6BECh. 21 - Prob. 21.7BECh. 21 - Prob. 21.8BECh. 21 - Prob. 21.9BECh. 21 - Prob. 21.10BECh. 21 - Prob. 21.11BECh. 21 - Prob. 21.12BECh. 21 - Prob. 21.13BECh. 21 - Prob. 21.14BECh. 21 - Prob. 21.1ECh. 21 - Prob. 21.2ECh. 21 - Prob. 21.3ECh. 21 - Prob. 21.4ECh. 21 - Prob. 21.5ECh. 21 - Prob. 21.6ECh. 21 - Error Analysis and Correction. Feinstein and...Ch. 21 - Prob. 21.8ECh. 21 - Prob. 21.9ECh. 21 - Prob. 21.10ECh. 21 - Prob. 21.1PCh. 21 - Prob. 21.2PCh. 21 - Prob. 21.3PCh. 21 - Prob. 21.4PCh. 21 - Prob. 21.5PCh. 21 - Prob. 21.6PCh. 21 - Prob. 21.7PCh. 21 - Cases Judgment Case Judgment Case: Materiality and...Ch. 21 - Prob. 1FSCCh. 21 - Surfing the Standards: Change in Accounting...Ch. 21 - Prob. 1BCC
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