Module Problem-Solution Assignment:
Problem 1
Red Sox Company has the following sales of land and cash collections:
In 2010, there was the sale of Bux Land for $3,000,000 that cost them $1,500,000. The purchase agreement required that payments be made of $1,200,000 when there are tenants on the land and the following payment of $1,200,000 was made in 2010.
In 2011, there was the sale of Spokane County land for $2,700,000 which cost Red Sox $1,800,000. The payments were required were $900,000 when development started on the land and then the final payments of $900,000 each in 2012 and 2013. Red Sox had cash collections of the $900,000 and a payment of $700,000 for Bux Land in 2011.
Additional Facts:
You will assume that Red Sox Company can estimate with ease the uncollectible accounts and then accrues the bad debts of 7% of sales and will recognize the revenue upon the transfer of title.
Requirements:
Prepare the journal entries to record the sales, cash collections and recognition of gross profit only if appropriate in the years 2010 and 2011.
Problem 2
Alpha Great Construction was the best selection to build the Stoddard Temple for the amount of $2,500,000. The project broke ground in 2010 and was then completed in 2011. Below the cost and other data are shown below:
|
Year
|
2010
|
2011
|
|
Costs incurred during the year
|
$555,000
|
1,200,000
|
|
Estimated sosts to complete
|
1,500,000
|
0
|
|
Billings during the year
|
450,000
|
1,500,000
|
|
Cash Collection during the year
|
350,000
|
1,400,000
|
Alpha Great Construction is using the percentage of completion method to recognize revenue:
Requirements:
Compute the amount of gross profit recognized in 2010 and 2011.