Questions -
Q1. The following information is for Redwood Inc. for the year ended December 31, 2016. Redwood had a cash and cash equivalents balance of $5,200 on January 1, 2016.
Cash received from:
Customers $ 1,900
Interest on investments 200
Sale of land 100
Sale of common stock 600
Issuance of debt securities 2,000
Cash paid for:
Interest on debt $ 300
Income tax 80
Debt principal reduction 1,500
Purchase of equipment 4,100
Purchase of inventory 1,000
Dividends on common stock 200
Operating expenses 500
Required: Prepare a statement of cash flows for the year using the direct method for operating activities.
Q2. Beavy Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2015 and completed in 2016. Cost and other data are presented below:
|
|
2015
|
2016
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|
Costs incurred during the year
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$450,000
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$1,100,000
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|
Estimated costs to complete
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1,050,000
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0
|
|
Billings during the year
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400,000
|
1,400,000
|
|
Cash collections during the year
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300,000
|
1,500,000
|
Required: Assume that Beavy recognizes revenue on this contract over time according to percentage of completion.
a. Compute the amount of gross profit recognized during 2015 and 2016.
b. Prepare all journal entries to record costs, billings, collections, and profit recognition.
Assume that Beavy recognizes revenue upon completion of the project.
c. Compute the amount of gross profit recognized during 2015 and 2016.
d. Prepare all journal entries to record costs, billings, collections, and profit recognition.