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Truus uemolition projects business assessment

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Added on: 2022-11-03 06:38:44
Order Code: 473986
Question Task Id: 0
  • Country :

    Canada

I Truus uemolition projects. Services for the Ul Hulue collecting, sorting and transporting reclaimed materials to recycling centres or contractors who will reuse them. Rex's incurs selling commission costs of $2,000 to obtain the contract. Before performing the services, Rex's also designs and builds specialty receptacles and loading equipment that interface with Dan's demolition equipment, at a cost of $27,000. These receptacles and equipment are retained by Rex's. Dan's promises to pay a fixed fee of $12,000 per year, payable every six months, for the services under the contract. Rex's incurs the following costs: design services for the receptacles to interface with Dan's equipment $3,000, loading equipment controllers $6,000, and special testing and health and safety inspection fees $2,000 (some of Dan's projects are on government property).

Instructions

a. Determine the costs that should be capitalized as part of Rex's revenue arrangement with Dan's.

b. Rex's also expects to incur general and administrative costs related to this contract, as well as costs of wasted materials and labour that likely cannot be factored into the contract price. Can these costs be capitalized? Explain.

E6.32 (LO 10) (Contract Costs, Collectibility) Refer to the information in E6.31.

Instructions a. Does the accounting for capitalized costs change if the contract is for one year rather than three years? Explain.

b. Digging Deeper Dan's is a start-up company; as a result, there is more than insignificant uncer tainty about Dan's ability to make the six-month payments on time. Does this uncertainty affect the amount of revenue to be recognized under the contract? Explain.

*E6.33 (LO 12, 14) (Recognition of a Profit on Long-Term Contracts) During 2023, Nilsen Company started a construction job with a contract price of $1.6 million. The job was completed in 2025. The following information is available. The contract is non-cancellable. 2023 m Costs incurred to date Estimated costs to complete Billings to date (non-refundable) Collections to date 2025 $1,070,000 $400,000 600,000 300,000 270,000 2024 $825,000 275,000 900,000 810,000 -0 1,600,000 1,425,000

Instructions a. Calculate the amount of gross profit to be recognized each year, assuming the percentage-of completion method is used.

b. Prepare all necessary journal entries for 2024.

c. Calculate the amount of gross profit to be recognized each year, assuming the completed-contract method is used.

*E6.34 (LO 10, 12) (Gross Profit on Uncompleted Contract) On April 1, 2023, Dougherty Inc. entered into a cost plus fixed fee non-cancellable contract to construct an electric generator for Altom Corporation. At the contract date, Dougherty estimated that it would take two years to complete the project at a cost of $2 million. The fixed fee stipulated in the contract was $450,000. Dougherty appropriately accounts for this contract under the percentage-of-completion method. During 2023, Dougherty incurred costs of $800,000 related to this project. The estimated cost at December 31, 2023, to complete the con

MUU LIIUL 20,000 receivable from Morganfield Ltd. will not be collected, and management has authorized its write-off. On January 31, 2024, Perez received notification that the company will receive $0.10 for every $1.00 of accounts receivable relating to McKinley Ltd. The company had previously written off 100% of the amount due from McKinley ($60,000). Perez follows IFRS. Instructions a. Prepare the journal entry for Perez to write off the Morganfield receivable and any journal entry needed to reflect the notice regarding McKinley. b. What is the estimated net realizable value of Perez's accounts receivable before and after the entries in part (a)? What is the book value of Perez's accounts receivable before and after the entries in part (a)?

E7.7 (LO 5) (Calculating Loss on Impairment) At January 1, 2023, the credit balance of Andy Corp.'s Allowance for Expected Credit Losses was $400,000. During 2023, the related loss on impairment entry was based on a percentage of net credit sales. Net sales for 2023 were $80 million, of which 90% were on account. Based on the information available at the time, the 2023 bad loss on impairment was estimated to be 0.8% of net credit sales. During 2023, uncollectible receivables amounting to $500,000 were written off against the allowance for expected credit losses. The company has estimated that at December 31, 2023, based on a review of the aged accounts receivable, the allowance for expected credit losses would be properly measured at $525,000.

Instructions

Prepare a schedule calculating the balance in Andy's Allowance for Expected Credit Losses at December 31, 2023. Prepare any journal entry needed at year end to adjust the allowance for expected credit losses to the required balance. Andy follows IFRS. E7.8 (LO 5) (Reporting Bad Debts) The chief accountant for Dickinson Corporation provides you with the following list of accounts receivable that were written off in the current year:

  • Uploaded By : Katthy Wills
  • Posted on : November 03rd, 2022
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