Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 18, Problem 59P
To determine
Determine the tax accounting method to be used by B Company for the contract with suitable reasons.
b.
To determine
Complete the schedule of B Company.
c.
To determine
Determine the tax consequence of B Company if the total cost of #360 million exceeds the estimated total cost of $300 million.
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On March 31, 2018, Big Boats Company entered into a contract with Vacations Unlimited to produce a state-of-the-art cruise ship to be completed within three years. Big Boats estimated the total cost of building the ship at $300,000,000. The contract price was $400,000,000. The ship was completed on February 15, 2021.
What tax accounting method must Big Boats use for the contract? Why?
Using the financial data provided relating to the contract’s performance, com- plete the following schedule.
What are the consequences of the total cost of $360,000,000 exceeding the estimated total cost of $300,000,000?
How much is the Gross Profit/Loss
Realized in 2018?
Celestial Holdings Co. began constructing a condominium on January 1, 2017 for a contract price of
P1,250,000. The entity has assured collection of its contract and the costs can be reliably estimated. For the
year ended December 31, 2018, Celestial billed its client an additional 60% of the contract price. Data relating
to the construction are as follows:
2017
2018
2019
Construction in Progress
Estimated Cost to Complete
300,000
Cost Incurred
250,000
600,000 112,500
Excess of CIP over PB
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Castro Construction signs a contract to build a hotel. The construction is
scheduled to begin on January 1, 2016 and is estimated to take four years to
complete. Castro expects that its total cost for this project would be $108
million and charges its client $151 million in total.
Based on the given actual costs incurred, complete the following table
showing the percentage of completion, revenue recognized and gross profit
for each year. Assume the company uses the percentage-of-completion
method for revenue recognition.
Do not enter dollar signs or commas in the input boxes.
Round all numbers to 1 decimal place.
Costs
Revenue
Percentage of
Completion
Year
Gross Profit*
Incurred*
Recognized*
2016
$12.96
% $
2017
$28.08
%
2018
$36.72
2019
$30.24
Total
$108.00
%
*The numbers are in million dollars.
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Chapter 18 Solutions
Individual Income Taxes
Ch. 18 - Prob. 1DQCh. 18 - Prob. 2DQCh. 18 - Prob. 3DQCh. 18 - Prob. 4DQCh. 18 - Prob. 5DQCh. 18 - Prob. 6DQCh. 18 - Prob. 7DQCh. 18 - LO.2 In 2019, the taxpayer became ineligible to...Ch. 18 - LO.2 Osprey Corporation, an accrual basis...Ch. 18 - Prob. 10DQ
Ch. 18 - Prob. 11DQCh. 18 - Prob. 12DQCh. 18 - LO.2 Emerald Motors is an automobile dealer. The...Ch. 18 - Prob. 14DQCh. 18 - Prob. 15DQCh. 18 - Prob. 16DQCh. 18 - Prob. 17DQCh. 18 - LO.4, 7 In December 2019, Carl Corporation sold...Ch. 18 - LO.2, 5 What are the similarities between the crop...Ch. 18 - Prob. 20DQCh. 18 - Prob. 21DQCh. 18 - Prob. 22DQCh. 18 - LO.6 Largo Company is an engineering consulting...Ch. 18 - Prob. 24DQCh. 18 - Prob. 25DQCh. 18 - Prob. 26DQCh. 18 - Prob. 27CECh. 18 - LO.2 Gaffney Corporation is a wholesale...Ch. 18 - Prob. 29CECh. 18 - LO.2 In 2019, Chaya Corporation, an accrual basis,...Ch. 18 - Prob. 31CECh. 18 - Prob. 32CECh. 18 - Prob. 33CECh. 18 - Prob. 34CECh. 18 - Prob. 35CECh. 18 - Prob. 36CECh. 18 - Prob. 37CECh. 18 - Prob. 38CECh. 18 - Prob. 39PCh. 18 - Prob. 40PCh. 18 - Prob. 41PCh. 18 - In 2018, Juan entered into a contract to write a...Ch. 18 - Prob. 43PCh. 18 - Compute Marys income or deductions for 2019 using...Ch. 18 - What accounting method (cash or accrual) would you...Ch. 18 - Blue Company, an architectural firm, has a...Ch. 18 - How do the all events and economic performance...Ch. 18 - Ross Company is a C corporation providing property...Ch. 18 - Prob. 49PCh. 18 - Prob. 50PCh. 18 - Floyd, a cash basis taxpayer, has received an...Ch. 18 - Prob. 52PCh. 18 - Prob. 53PCh. 18 - On June 30, 2019, Kelly sold property for 240,000...Ch. 18 - Prob. 55PCh. 18 - Prob. 56PCh. 18 - Prob. 57PCh. 18 - Prob. 58PCh. 18 - Prob. 59PCh. 18 - Ostrich Company makes gasoline storage tanks....Ch. 18 - Prob. 61PCh. 18 - Grouse Company is a furniture retailer whose...Ch. 18 - Lavender Manufacturing Company began business in...Ch. 18 - Silver Creek Ranch LLC is a small, family-owned...Ch. 18 - In 2019, Gail changed from the lower of cost or...Ch. 18 - At the end of 2020, Magenta Manufacturing Company...Ch. 18 - Prob. 67PCh. 18 - Prob. 68PCh. 18 - Prob. 69PCh. 18 - Prob. 1RPCh. 18 - Prob. 2RPCh. 18 - Prob. 3RPCh. 18 - Paula has sales that qualify to be reported on the...
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