Question 1
Rupp Corp. provides services to customers exclusively on account. At 12/31/2013 Rupp‘s balance sheet reported accounts receivable (net) of $.9 million - accounts receivable had a balance of $1.0 million and the balance in allowance for uncollectible accounts (AFUA) was $.1 million. During 2014 Rupp billed customers $3 million for services provided (all on account), collected $2.8 million from customers for payment on account, and wrote-off $.08 million of customers' accounts as uncollectible.
Required:
Determine the balances in accounts receivable and AFUA at 12/31/2014 before adjustment,
Determine 2014 uncollectible accounts expense and the after adjustment balance in AFuA assuming Rupp applies the "income statement method" and estimates bad debt expense at 5% of 2014 credit sales,
Determine 2014 bad debt expense and the after adjustment balance in AFUA assuming Rupp applies the "balance sheet method" and estimates that that $.18 million of year-end 2014 accounts receivable will be uncollectible.
Question 2
Victor Corp. sells inventory (a bulldozer) to Petril Co. for $120,000 on 6/01/13 with twelve monthly payments of $10,000 each to be received from Petril at the beginning of each month June 2013 - May 2014. Victor previously acquired the bulldozer at a cost of $90,000. Required: determine the amount of gross profit recognized by Victor in 2013 and 2014 assuming all payments are received on time and
Victor applies:
The general revenue (recognition) principle,
The "installment method,"
The "cost recovery first method."
Question 3
Barron construction Corp. enters into a long-term contract to build an office building for Carrillo Corp. at a fixed contract price of $110 million on 5/12/2012. Construction of the building is completed on 11/30/2014 at a total cost of $ 100 million. Actual costs incurred during each year were as follows: $18 million in 2012, $39 million in 2013, and $43 million in 2014. The total estimated cost to complete construction was $72 million at 12/31/2012 and $38 million at 12/31/2013. Required: Determine the amount of gross profit to be recognized in 2012, 2013, and 2014 assuming Barron applies:
a) The completed contract method, and
b) The percentage of completion method