(Solution) 12 February 2012, 5 Pm PROBLEM 1: Sierra Has Contracted With Rip-Roaring Roy Construction Company For The Construction Of A New Office Building.... | Snapessays.com


(Solution) 12 February 2012, 5 pm PROBLEM 1: Sierra has contracted with Rip-Roaring Roy Construction Company for the construction of a new office building....


PROBLEM 1: Sierra has contracted with Rip-Roaring Roy Construction Company for the construction of a new office building. Rip-Roaring Roy estimated the cost of the construction as $5,000,000; the contract price was $8,000,000. Sierra felt the contract price was too high and obtained other estimates of the cost of construction. Consequently, the contract was signed with a contract price of $6,500,000. Rip-Roaring Roy uses the percentage of completion method for accounting for revenue from construction projects.

 

 

In order to be able to fund the beginning of construction, on 3/16/2011 Roy borrowed $3,000,000 from 1st Tiger National Bank on a 2 year 9 % note specifically for this project. Interest is to be paid annually with the principal being paid on the due date of 3/15/2013. Roy has the following other debt:

 

 

$2,500,000 12 % 5 year, note payable. Borrowed on 4/15/2008. Monthly payments are being made; all payments have been made on a timely basis.

 

 

$4,000,000 8 %, 20 year bonds issued on 5/1/2005 when the effective interest rate was 5%. The bonds pay interest semi-annually each 5/1 and 11/1.

 

 

The following payments were made for the construction that started on 4/1/2011 and was completed on 6/30/2013.

 

 

4/20/2011 $500,000

 

9/10/2011 1,250,000

 

12/1/2011 600,000

 

1/25/2012 405,000

 

6/5/2012 1,155,000

 

8/29/2012 635,000

 

12/31/2012 1,116,000

 

4/20/2013 275,000

 

6/30/2013 280,000

 

 

The following estimates of costs anticipated to complete the contract were obtained:

 

12/31/2011 2,650,000

 

12/31/2012 239,000

 

 

Roy invoiced Miss Sierra $625,000 each quarter beginning 6/30/2011. (invoice dates fall on all calendar quarter ending dates). The payments are due within 10 days of being invoiced. Miss Sierra has made all payments on time. The last payment is on 6/30/2013 for the remainder of the contract price. No invoice was sent on 3/31/2013.

 

 

Required:

 

Please prepare all journal entries for 2011-2013 relating to the construction of this building. Roy uses the percentage of completion method of revenue recognition and meets all criteria for application of the method. Include in the entries all entries required to properly record the actual interest incurred each period. You must show all computations in good form in order to receive credit for this problem. Hint: interest is a construction cost.

 

How would your answer change is Roy used completed contract??? Please prepare entries relating to completed contract.

 

PROBLEM 2:

 

Guerini Prater owns a retail equipment store and routinely sells merchandise on an installment basis. His accountant, Sammy LeSquirrel, graduated from the University of Rodent Land; he majored in partying and acorn gathering. Since he did not know that installment accounting method was different from regular sales, he has recognized all revenue and profit at the time the sales were made. Information about the company follows:

 

 

Year Installment sales Cost of installment sales Amount collected Year collected

 

2008 350,000 235,000 90,000 2008

 

100,000 2009

 

25,000 2010

 

2009 446,000 292,400 155,000 2009

 

100,000 2010

 

60,000 2011

 

2010 527,500 371,200 195,000 2010

 

 

 

While researching the information, you discover that no allowance for doubtful installment accounts has been established. Upon further research, you determine that 3% of ending accounts receivable will be a reasonable estimate. Just when you think you have completed your work, you realize that Guerini has had several defaults – the information is reported below:

 

 

1. Sale of equipment on 10/28/2008 for $80,000. After collecting $35,000, the buyer defaulted. The equipment was repossessed and was resold on 12/1/2009 for $32,400. No entry was made for the repossession; the sale was recorded with a debit to cash and a credit to sales. Repossessed merchandise was worth $28,000 on date of repossession.

 

2. Equipment sold on 4/1/2009 for $25,000 was repossessed on 2/15/2010 after the buyer defaulted. $8,000 had been collected from the buyer before the default. No entry was made for the repossession. The repossessed inventory was worth $10,000 on the date of repossession.

 

You have been hired to prepare any entries required at 12/31/2010 to correctly report the installment sales for Guerini.Accounting 313

 

Spring 2012

 

Chapter 18 homework

 

Due in BB as an assignment:

 

12 February 2012, 5 pm

 

P

 

ROBLEM

 

1:

 

Sierra has contracted with Rip-Roaring Roy Construction Company for the

 

construction of a new office building.

 

Rip-Roaring Roy estimated the cost of the construction as

 

$5,000,000; the contract price was $8,000,000.

 

Sierra felt the contract price was too high and

 

obtained other estimates of the cost of construction.

 

Consequently, the contract was signed with

 

a contract price of $6,500,000.

 

Rip-Roaring Roy uses the percentage of completion method for

 

accounting for revenue from construction projects.

 

In order to be able to fund the beginning of construction, on 3/16/2011 Roy borrowed $3,000,000

 

from 1

 

st

 

Tiger National Bank on a 2 year 9 % note specifically for this project.

 

Interest is to be

 

paid annually with the principal being paid on the due date of 3/15/2013.

 

Roy has the following

 

other debt:

 

$2,500,000 12 % 5 year, note payable.

 

Borrowed on 4/15/2008.

 

Monthly payments are being

 

made; all payments have been made on a timely basis.

 

$4,000,000 8 %, 20 year bonds issued on 5/1/2005 when the effective interest rate was 5%.

 

The

 

bonds pay interest semi-annually each 5/1 and 11/1.

 

The following payments were made for the construction that started on 4/1/2011 and was

 

completed on 6/30/2013.

 

4/20/2011

 

$500,000

 

9/10/2011

 

1,250,000

 

12/1/2011

 

600,000

 

1/25/2012

 

405,000

 

6/5/2012

 

1,155,000

 

8/29/2012

 

635,000

 

12/31/2012

 

1,116,000

 

4/20/2013

 

275,000

 

6/30/2013

 

280,000

 

The following estimates of costs anticipated to complete the contract were obtained:

 

12/31/2011

 

2,650,000

 

12/31/2012

 

239,000

 

Roy invoiced Miss Sierra $625,000 each quarter beginning 6/30/2011.

 

(invoice dates fall on all

 

calendar quarter ending dates).

 

The payments are due within 10 days of being invoiced.

 

Miss

 

Sierra has made all payments on time.

 

The last payment is on 6/30/2013 for the remainder of the

 

contract price.

 

No invoice was sent on 3/31/2013.

 

Required:

 

Please prepare all journal entries for 2011-2013 relating to the construction of this building. Roy

 

uses the percentage of completion method of revenue recognition and meets all criteria for

 


Solution details:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: May 23, 2022

Solution~00021147602037.zip (25.37 KB)


This attachment is locked

Our expert Writers have done this assignment before, you can reorder for a fresh, original and plagiarism-free copy and it will be redone much faster (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

May 23, 2022

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • ■ As a reference for in-depth understanding of the subject.
  • ■ As a source of ideas / reasoning for your own research (if properly referenced)
  • ■ For editing and paraphrasing.

This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

Get Free Price Quote