Part A
Howard Construction Co. contracted to build a bridge for $3,000,000. Construction began in 2012 and was completed in 2013. Data relating to the construction are:
2012 2013
Costs incurred $990,000 $825,000
Estimated costs to complete 810,000 —
Howard uses the percentage-of-completion method.
Instructions
(a) How much revenue should be reported for 2012? Show your computation.
(b) Make the entry to record progress billings of $1,000,000 during 2012.
(c) Make the entry to record the revenue and gross profit for 2012.
(d) How much gross profit should be reported for 2013? Show your computation.
Part B
Tanner Furniture Company concluded its first year of operations in which it made sales of $1,500,000, all on installment. Collections during the year from down payments and installments totaled $600,000. Purchases for the year totaled $900,000; the cost of merchandise on hand at the end of the year was $180,000. Tanner uses a perpetual inventory system.
Instructions
Using the installment-sales method, make summary journal entries to record:
(a) the installment sales and cash collections.
(b) the cost of installment sales.
(c) the unrealized gross profit.
(d) the realized gross profit.