Transcribed Image Text: EXERCISES On June 1, 2003, the Luttman and Dowd Company sold inventory to the Ushman Corporation for $400,000. Terms of the sale called for a down payment

Transcribed Image Text: EXERCISES
On June 1, 2003, the Luttman and Dowd Company sold inventory to the
Ushman Corporation for $400,000. Terms of the sale called for a down payment
of $100,000 and four annual installments of $75,000 due on each June 1,
beginning June 1, 2004. Each installment also will include interest on the unpaid
balance applying an appropriate interest rate.
$150,000. The company uses the perpetual inventory system.
Exercise 5-1
Installment sales;
alternative
recognition
methods
The inventory cost Foster
Required:
1. Compute the amount of gross profit to be recognized from the installment
sale in 2003, 2004, 2005, 2006, and 2007 using point of delivery revenue
recognition. Ignore interest charges.
2. Repeat requirement 1 applying the installment sales method.
3. Repeat requirement 1 applying the cost recovery method.
Exercise 5-2
Construction
The Ugenti Construction Company contracted to construct a warehouse
building for $2,600,000.
2004. Data relating to the contract are summarized below:
Construction began in 2003 and was completed in
accounting;
percentage-of-
completion and
completed contract
methods
2003
$ 360,000
1,560,000
430,000
320,000
2004
Costs incurred during the year .. ….
Estimated costs to complete as of 12/31
Billings during the year
Cash collections during the year.
$1,650,000
2,130,000
2,280,000
Required:
1. Compute the amount of gross profit or loss to be recognized in 2003 and
2004 using the percentage-of-completion method.
2. Compute the amount of gross profit or loss to be recognized in 2003 and
2004 using the completed contract method.
3. Prepare a partial balance sheet to show how the information related to this
contract would be presented at the end of 2003 using the percentage-of
completion method.
4. Prepare a partial balance sheet to show how the information related to this
contract would be presented at the end of 2003 using the completed contract
method.
O The McGraw-ll Companies, Inc., 2004
5-1
Alternate Exercises and Problems

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