Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Textbook Question
thumb_up100%
Chapter 17, Problem 13E
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for $7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of $600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by $150,000. Elkhart provides the following completion schedule:
Required:
- 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price?
- 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price?
- 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
In 2019, Tarlo Company agrees to construct a highway for Brice County over a 3-year period (2019 through 2021). The contract price is $1,200,000, and the construction costs (both actual and estimated) total $705,000 for the 3 years. Tarlo's estimate of progress toward satisfaction of the performance obligation at the end of each year is as follows: 2019, 20%; 2020, 75%; 2021, 100%.
Required:
1. Prepare a schedule showing the amount of gross profit that Tarlo recognizes each year assuming the performance obligation is determined to be satisfied over time.
Tarlo Company
Gross Profit: Percentage-of Completion Method
2019 through 2021
Amount
2019
$
2020
2021
Total gross profit
$
2. Prepare a schedule showing the amount of gross profit that Tarlo recognizes each year assuming the performance obligation is satisfied at a point in time. If an amount is zero, enter "0".
Tarlo Company
Gross Profit: Completed-Contract Method
2019 through 2021…
Entity A started a three-year contract to build a new office building on 1 April 2019. The contract had a fixed price of $90,000,000. The entity will satisfy the performance obligation over time.
The entity incurred costs to 31 March 2020 of $77,000,000 and estimated that a further $33,000,000 would need to be spent to complete the contract.
The entity measures the progress of contracts using work completed compared to the contract price.
At 31 March 2020, a surveyor valued the work completed to date at $63,000,000.
REQUIRED:
Measure the contract revenue and the contract cost in the Statement of Profit or Loss for the year ended 31 March 2020 respectively.
Curtiss Construction Company, Inc. entered into a fixed-price contract with Stewart Associates
on July 1, 2019, to construct a four-story office building. At that time, Curtiss estimated it would
take between two and three years to complete the project. The total contract price for
construction of the building is $5,000,000. The building was completed on December 31, 2021.
Information related to the construction is as follows:
At 12/31/19
At 12/31/20
Costs incurred to date
Estimated costs to complete
Billings to Stewart
Required:
1. Prepare entries to record construction costs and billings for each year
$350,000
3,150,000
700,000
$2,500,000
1,700,000
At 12/31/21
2,200,000
$4,250,000
0
2,100,000
Chapter 17 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 17 - Prob. 1GICh. 17 - Prob. 2GICh. 17 - When a company recognizes revenue during a period,...Ch. 17 - Prob. 4GICh. 17 - Prob. 5GICh. 17 - What is the proper accounting for a wholly...Ch. 17 - If a seller enters into more than one contract...Ch. 17 - Prob. 8GICh. 17 - Prob. 9GICh. 17 - Prob. 10GI
Ch. 17 - Prob. 11GICh. 17 - Prob. 12GICh. 17 - Prob. 13GICh. 17 - Prob. 14GICh. 17 - Prob. 15GICh. 17 - Prob. 16GICh. 17 - If the standalone selling price of a good or...Ch. 17 - Prob. 18GICh. 17 - Prob. 19GICh. 17 - If the sellers performance creates on asset (e.g.,...Ch. 17 - Describe input and output methods used to measure...Ch. 17 - Prob. 22GICh. 17 - Prob. 23GICh. 17 - Prob. 24GICh. 17 - Prob. 25GICh. 17 - A company should recognize revenue when a. the...Ch. 17 - A contract between one or more parties creates: a....Ch. 17 - Morgan Company and its customer agree to modify...Ch. 17 - Chlorine Corp. has a contract to deliver pool...Ch. 17 - Prob. 5MCCh. 17 - Prob. 6MCCh. 17 - In accounting for a long-term construction...Ch. 17 - Prob. 9MCCh. 17 - Prob. 10MCCh. 17 - CustomTee Inc. contracts with various customers to...Ch. 17 - Yankee Corp. agrees to provide Albany Company 24...Ch. 17 - Prob. 3RECh. 17 - Prob. 4RECh. 17 - LongDrive sells a specialized golf club that has...Ch. 17 - Prob. 6RECh. 17 - VolleyElite runs a volleyball program consisting...Ch. 17 - Enterprise Solutions Inc. licenses its...Ch. 17 - Prob. 9RECh. 17 - Magical Memories sells Florida theme park vacation...Ch. 17 - Prob. 11RECh. 17 - Robotics Inc. contracts with a customer to build a...Ch. 17 - CoolShoes sells its elite tennis shoes to sports...Ch. 17 - Using the information in RE17-13, what journal...Ch. 17 - GameDay sells recreational vehicles along with...Ch. 17 - Prob. 16RECh. 17 - Using the information provided in RE17-16, prepare...Ch. 17 - Prob. 18RECh. 17 - Prob. 19RECh. 17 - Company enters into a contract with Dearborn Inc....Ch. 17 - Consider each of the following scenarios: a. A...Ch. 17 - On August 1, 2019, Aiken Corp. enters into a...Ch. 17 - On January 1, 2019, Spring Fashions Inc. enters...Ch. 17 - On January 1, 2019, Loud Company enters into a...Ch. 17 - Assume the same facts as in El7-5. On July 1,...Ch. 17 - Assume the same facts as in E17-5 and ignore...Ch. 17 - Prob. 8ECh. 17 - GrillMaster Inc. sells an industry-leading line of...Ch. 17 - WaterWorld Inc. operates an aquarium and water...Ch. 17 - Prob. 11ECh. 17 - Jonas Consulting enters into a contract to provide...Ch. 17 - On March 1, 2019, Elkhart enters into a new...Ch. 17 - On January 5, 2019, ShoeKing Corp. sells for cash...Ch. 17 - On January 1, 2019, Piper Company entered into an...Ch. 17 - On January 1, 2019, Fulton Inc. enters into a...Ch. 17 - Prob. 17ECh. 17 - On December 1, 2019, AwakcAllNight Inc. sells...Ch. 17 - Rix Company sells home appliances and provides...Ch. 17 - Assume the same facts as in E17-19, except that...Ch. 17 - Crazy Computer Store sells a back-to-school bundle...Ch. 17 - Each of the following is an independent situation...Ch. 17 - Prob. 23ECh. 17 - Prob. 24ECh. 17 - Koolman Construction Company began work on a...Ch. 17 - Prob. 26ECh. 17 - Each of the following independent situations...Ch. 17 - JustKitchens Inc. provides services to restaurants...Ch. 17 - On January 1, 2019, ForeRunner Inc. enters into a...Ch. 17 - January 2, 2019, TI enters into a contract with...Ch. 17 - Prob. 5PCh. 17 - Prob. 6PCh. 17 - Fender Construction Company receives a contract to...Ch. 17 - SoccerHawk Merchandise Inc. enters into a 6-month...Ch. 17 - Prob. 9PCh. 17 - Prob. 10PCh. 17 - Blackmon Company provides locator services to the...Ch. 17 - Prior to ASU 2014-09 changing the principles...Ch. 17 - The first step in the revenue recognition process...Ch. 17 - Prob. 3CCh. 17 - One of the more difficult issues that companies...Ch. 17 - Prob. 5CCh. 17 - On October 1, 2019, Grahams WeedFeed Inc. signs a...Ch. 17 - On January 1, 2019, Mopps Corp. agrees to provide...Ch. 17 - Prob. 8CCh. 17 - Revenue for a company is recognized for accounting...Ch. 17 - Prob. 10C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $5,000,000 each year. The total contract price is $15,000,000 and Seasons estimates total costs of $12,000,00O. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2021, Seasons estimates that it is 30% complete with the construction, based on costs incurred, which are consistent with the original estimate. Prepare the journal entries required in 2021, if any, to record construction costs, revenues, and billings.arrow_forwardCurtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2021, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,000,000. The building was completed on December 31, 2023. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows: Percentage of completion Costs incurred to date Estimated costs to complete Billings to Axelrod, to date Req 1 and 2 Complete this question by entering your answers in the tabs below. Req 3 At 12-31-2021 At 12-31-2022 10% $ 350,000 3,150,000 720,000 $2,500,000 1,700,000 2,170,000 Year 2021 2022 2023 Total project profit (loss) Required: 1. Compute gross profit or loss to be recognized as a result of this contract for each of…arrow_forwardKoolman Construction Company began work on a contract in 2019. The contract price is $3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows: 2019 2020 Costs incurred during the year $600,000 $700,000 Estimated costs to complete, December 31 1,400,000 1,200,000 Billings during the year 500,000 850,000 Collections during the year 400,000 800,000 Required: 1. Compute the gross profit or loss recognized in 2019 and 2020. If there is a loss a minus sign must be entered. 2. Prepare the appropriate sections of the income statement for each year. If there is a loss a minus sign must be entered. 3. Prepare the appropriate sections of the ending balance sheet for the year 2019. 4. Prepare the appropriate sections of the ending balance sheet for 2020.arrow_forward
- Curtiss Construction Company, Incorporated, entered into a fixed-price contract with Axelrod Associates on July 1, 2024, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,720,000. The building was completed on December 31, 2026. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows: At 12-31-2024 At 12-31-2025 At 12-31-2026 Percentage of completion 10% 60% 100% Costs incurred to date $ 371,000 $ 3,024,000 $ 5,102,000 Estimated costs to complete 3,339,000 2,016,000 0 Billings to Axelrod, to date 732,000 2,410,000 4,720,000 Required: Compute gross profit or loss to be recognized as a result of this contract for each of the three years. Curtiss concludes that the contract does not…arrow_forwardCurtiss Construction Company, Incorporated, entered into a fixed-price contract with Axelrod Associates on July 1, 2024, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,480,000. The building was completed on December 31, 2026. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows: Percentage of completion Costs incurred to date Estimated costs to complete Billings to Axelrod, to date At 12-31-2024 At 12-31-2025 $367,000 3,303,000 728,000 $ 2,856,000 1,904,000 2,330,000 Ren 1 and 2 10% Dan 3 60% Answer is not complete. Complete this question by entering your answers in the tabs below. Required: 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three…arrow_forwardOriole Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $2050000 each quarter. The total contract price is $18222000 and Oriole estimates total costs of $17100000. Oriole estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2021, Oriole estimates that it is 20% complete with the construction, based on costs incurred.At December 31, 2022, Oriole Construction estimates that it is 70% complete with the building; however, the estimate of total costs to be incurred has risen to $17300000 due to unanticipated price increases. What is the total amount of Construction Expenses that Oriole will recognize for the year ended December 31, 2022? $8690000 $8325600 $12110000 $8465600arrow_forward
- Bartov Corporation agreed to build a warehouse for $2,500,000. Expected (and actual) costs for the warehouse follow: 2019, $400,000; 2020, $1,000,000; and 2021, $500,000. The company completed the warehouse in 2021. Compute revenues, expenses, and income for each year 2019 through 2021 assuming that Bartov’s performance obligation for the warehouse is fulfilled over time and that the costs incurred provide a close approximation of the value conveyed to the customer. Round percentages to the nearest whole percent. Use rounded percentages to calculate subsequent answers.arrow_forwardCurtiss Construction Company, Incorporated, entered into a fixed price contract with Axelrod Associates on July 1, 2024, to construct a four story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,240,000 The building was completed on December 31, 2026 Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows Percentage of completion Cests incurred to date Estimated costs to complete Billings to Axelrod, to date Required: At 12-11-2024 10% At 12-31-2025 $2,688,000 1,792,000 AT 12-11-2026 60% 100% $ 4,534,000 4,240,000 $363,000 3,267,000 724,000 2,250,000 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years. Curtiss concludes that the contract does not qualify for revenue…arrow_forwardCurtiss Construction Company, Incorporated, entered into a fixed-price contract with Axelrod Associates on July 1, 2024, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,060,000. The building was completed on December 31, 2026. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows: Percentage of completion Costs incurred to date Estimated costs to complete Billings to Axelrod, to date Required: At 12-31-2024 10% $ 360,000 3,240,000 721,000 At 12-31-2025 $ 2,562,000 1,708,000 2,190,000 At 12-31-2026 60% 100% $ 4,321,000 0 4,060,000 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years. Curtiss concludes that the contract does not qualify for…arrow_forward
- Bartov Corporation agreed to build a warehouse for $2,500,000. Expected (and actual) costs for the warehouse follow : 2019, $400,000; 2020, $1,000,000; and 2021, $500,000. The company completed the warehouse in 2021. Compare revenues, expenses, and income for each year 2019 through 2021 assuming that Bartov’s performance obligation for the warehouse is fulfilled over time and that the costs incurred provide a close approximation of the value conveyed to the customer.arrow_forwardWCM Builders enters into a contract to build a shopping mall in 2019 for $6,000,000. Completion of the mall is expected to take 27 months and cost WCM $3,600,000. Upon signing the contract, WCM receives $600,000. During 2020, WCM incurs costs of $1,200,000 and receives a $1,000,000 progress payment. WCM’s forewoman estimates that the job is 50% complete at the end of 2020. How much income must WCM recognize in 2020 from the work done on the mall?arrow_forwardA construction company is constructing an office building under contract for Codwell Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and the construction company estimates total costs of $17,750,000. They also estimate that the building will take 3 years to complete, and commences construction on January 2, 2021.At December 31, 2021, the construction company estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2021 and what is the balance in the Accounts Receivable account assuming Codwell Company has not yet made its last quarterly payment? Revenue Accounts Receivable Question 2 options: a $6,200,000 $6,200,000 b $5,325,000 $1,550,000 c $5,580,000 $1,550,000 d $5,325,000…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Revenue recognition explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=816Q6pOaGv4;License: Standard Youtube License