Intermediate Accounting, Student Value Edition (2nd Edition)
2nd Edition
ISBN: 9780134732145
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 21, Problem 21.5P
a.
To determine
The cumulative effect after tax.
b.
To determine
To prepare:
c.
To determine
To prepare: The footnote for the accounting method change in the financial statement.
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1. During 2020, Bay Construction started a new construction job with a contract price of $750 million.
Bay has a 12/31 fiscal year end. Bay has determined that the contract does not qualify for revenue
recognition over time. The contract was completed on 12/31/22 with the following information ($ in
millions):
Costs incurred in the period (paid in cash)
Estimated costs to complete at 12/31
Billings on contract in the period
Cash collected in the period
2020
180.0
2021
2022
432.0
150.0
540.0
153.0
-0-
150
350
250
200
400
150
What is the amount of gross profit (loss) on the contract that Bay would recognize on the Income
Statement in 2020, 2021 and 2022? You must show supporting work (calculations/explanations) to
receive credit for your answers.
Gross Profit (Loss)
2020
2021
2022
In 2021, Crane Corporation began construction work under a three-year contract. The contract price is $ 480000. Crane uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2021, follow:
Balance Sheet
Accounts receivable—construction contract billings
$ 192000
Construction in progress
$ 600000
Less contract billings
480000
Costs and recognized profit in excess of billings
120000
Income Statement
Income (before tax) on the contract recognized in 2021
$ 120000
How much cash was collected in 2021 on this contract?
$ 480000
$ 48000
$ 288000
$ 192000
Roe Construction Company uses the percentage-of-completion method of accounting. In 2021, Roe began work on a contract it had received which provided for a contract price of $15,000,000. Other details follow:
2021
Costs incurred during the year
$7,200,000
Estimated costs to complete as of December 31
4,800,000
Billings during the year
6,600,000
Collections during the year
3,900,000
What should be the gross profit recognized in 2021?
Chapter 21 Solutions
Intermediate Accounting, Student Value Edition (2nd Edition)
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 - Change in Accounting Principle, Inventory. Massi...Ch. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.3ECh. 21 - Change in Accounting Principle, Inventory. Winthur...Ch. 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 - Change in Accounting Principle, Inventory. Second...Ch. 21 - Prob. 21.2PCh. 21 - Prob. 21.3PCh. 21 - Prob. 21.4PCh. 21 - Prob. 21.5PCh. 21 - Change in Estimate, Inventory, Bad Debt Expense....Ch. 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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