VIEWS: 291 PAGES: 5 CATEGORY: Business POSTED ON: 2/14/2011 Public Domain
Instructions for the Microsoft Excel Templates Be advised, the worksheet and workbooks are not protected. Extensive detail and information is contained within the manual. Striking the "F1" key or following the path "Windows>Excel Help" will invoke the Office Assistant and bring up one of several help menus. You should enter your name, course ID, and date name into the cells at the top of the page. Each page contains a page footer with a Page # of Page ## as well as time and date to assist in assembly of multiple pages. Each worksheet contains the identification of the problem or exercise. All formatting should have been accomplished to provide satisfactory presentation. See the text for additional assistance in formatting. There should be no need to insert columns or rows into the workbooks. If more than one page is required by the problem, the page breaks are preset. In general, the yellow highlighted cells are the cells which work and effort should be presented. Place the proper account title in the cell where the word "Account title" appears on the template. Place the value in the cell where the word "Value" or "Amount" appears on the template. A formula may be placed in some of these cells. Write a formula into cells where the word "Formula" appears. In these cells, an amount calculated can be entered. An amount can be placed in these cells. Place the explanation for the entry in the cell where the word "Text Explanation" appears on the template. Insert the account number where "Acct Nbr" appears on the template during posting. Insert the journal reference where "JOURN #" appears on the template during posting. Insert the title in the cell where "TITLE" appears on the template. The print area is defined to fit onto 8 1/2" X 11" sheets in portrait or landscape mode as required. The gray filled cells define the perimeter of the problem and the print area. The problem is formatted for whole dollars with comma separations (no cents) except where required. The display may have "Freeze Pane" invoked so column titles remain visible during data entry. Negative values may be shown as ($400) or -$400. Instructions, Page 1 of 5, 2/14/2011, 11:58 AM Consider using "Split" panes to assist in copy and paste of data. Much of the exercises and problems can have data entered by the "look to" or "=A34" type formula where cell A34 contains the data to be entered. This precludes typing and data entry errors. Instructions, Page 2 of 5, 2/14/2011, 11:58 AM Name: Problem: P18-5, Completed Contract and Percentage of Completion with Interim Loss Course: Date: Reynolds Custom Builders (RCB) was established in 1985 by Avery Conway and initially built high-quality customized homes under contract with specific buyers. In the 1990s, Conway’s two sons joined the company and expanded RCB’s activities into the high-rise apartment and industrial plant markets. Upon the retirement of RCB’s long-time financial manager, Conway’s sons recently hired Ed Borke as controller for RCB. Borke, a former college friend of Conway’s sons, has been associated with a public accounting firm for the last 6 years. Upon reviewing RCB’s accounting practices, Borke observed that RCB followed the completed contract method of revenue recognition, a carryover from the years when individual home building was the majority of RCB’s operations. Several years ago, the predominant portion of RCB’s activities shifted to the high-rise and industrial building areas. From land acquisition to the completion of construction, most building contracts cover several years. Under the circumstances, Borke believes that RCB should follow the percentage-of-completion method of accounting. From a typical building contract, Borke developed the following data. BLUESTEM TRACTOR PLANT Contract price $8,000,000 2010 2011 2012 Estimated costs $1,600,000 $2,880,000 $1,920,000 Progress billings 1,000,000 2,500,000 4,500,000 Cash collections 800,000 2,300,000 4,900,000 Instructions: (a) Explain the difference between completed-contract revenue recognition and percentage- of-completion revenue recognition. Enter text answer here as appropriate. (b) Using the data provided for the Bluestem Tractor Plant and assuming the percentage-of-completion method of revenue recognition is used, calculate RCB’s revenue and gross profit for 2010, 2011, and 2012, under each of the following circumstances. (1) Assume that all costs are incurred, all billings to customers are made, and all collections from customers are received within 30 days of billing, as planned. Problem 18-5, Page 3 of 5, 2/14/2011, 11:58 AM Name: Problem: P18-5, Completed Contract and Percentage of Completion with Interim Loss Course: Date: Percentage-of-Completion (Cost-to-Cost Basis) ($000 omitted) Estimated Contract Costs Estimated Percent Year Gross Price to Date Total Costs Complete Profit 2010 Amount Amount Formula Formula Formula 2011 Amount Amount Formula Formula Formula 2012 Amount Amount Formula Formula Formula Revenue recognition Contract Percent Revenue Less Prior Current Year Price Complete Recognizable Year(s) Year 2010 Amount Formula Formula Formula Formula 2011 Amount Formula Formula Formula Formula 2012 Amount Formula Formula Formula Formula Profit recognition Estimated Percent Profit Less Prior Current Year Profit Complete Recognizable Year(s) Year 2010 Amount Formula Formula Formula Formula 2011 Amount Formula Formula Formula Formula 2012 Amount Formula Formula Formula Formula (2) Further assume that, as a result of unforeseen local ordinances and the fact that the building site was in a wetlands area, RCB experienced cost overruns of $800,000 in 2010 to bring the site into compliance with the ordinances and to overcome wetlands barriers to construction. Percentage-of-Completion (Cost-to-Cost Basis) ($000 omitted) Estimated Contract Costs Estimated Percent Year Gross Price to Date Total Costs Complete Profit 2010 Amount 2,400 7,200 Formula Formula 2011 Amount 5,280 7,200 Formula Formula 2012 Amount 7,200 7,200 Formula Formula Revenue recognition Contract Percent Revenue Less Prior Current Year Price Complete Recognizable Year(s) Year 2010 Amount Formula Formula Formula Formula 2011 Amount Formula Formula Formula Formula 2012 Amount Formula Formula Formula Formula Problem 18-5, Page 4 of 5, 2/14/2011, 11:58 AM Name: Problem: P18-5, Completed Contract and Percentage of Completion with Interim Loss Course: Date: Profit recognition Estimated Percent Profit Less Prior Current Year Profit Complete Recognizable Year(s) Year 2010 Amount Formula Formula Formula Formula 2011 Amount Formula Formula Formula Formula 2012 Amount Formula Formula Formula Formula (3) Further assume that, in addition to the cost overruns of $800,000 for this contract incurred under part (b)2, inflationary factors over and above those anticipated in the development of the original contract cost have caused an additional cost overrun of $850,000 in 2011. It is not anticipated that any cost overruns will occur in 2012. Percentage-of-Completion (Cost-to-Cost Basis) ($000 omitted) Estimated Contract Costs Estimated Percent Year Gross Price to Date Total Costs Complete Profit 2010 Amount 2,400 7,200 Formula Formula 2011 Amount Amount Amount Formula Formula 2012 Amount Amount Amount Formula Formula Revenue recognition Contract Percent Revenue Less Prior Current Year Price Complete Recognizable Year(s) Year 2010 Amount Formula Formula Formula Formula 2011 Amount Formula Formula Formula Formula 2012 Amount Formula Formula Formula Formula Profit recognition Estimated Percent Profit Less Prior Current Year Profit Complete Recognizable Year(s) Year 2010 Amount Formula Formula Formula Formula 2011 Amount Formula Formula Formula Formula 2012 Amount Formula Formula Formula Formula Enter text answer as appropriate. Problem 18-5, Page 5 of 5, 2/14/2011, 11:58 AM