Ch 18 n 19 comp

At December 31, 2015, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases. What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2015?

At December 31, 2015, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases. What is reported in the balance sheet at December 31, 2015 for Seasons as the difference between the Construction in Process and the Billings on Construction in Process accounts, and is it a debit or a credit?
Difference between the accounts Debit/Credit

Seasons Construction completes the remaining 25% of the building construction on December 31, 2016, as scheduled. At that time the total costs of construction are $15,000,000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that Seasons will recognize for the year ended December 31, 2016?
Revenue Expenses

Cooper Construction Company had a contract starting April 2015, to construct a $18,000,000 building that is expected to be completed in September 2017, at an estimated cost of $16,500,000. At the end of 2015, the costs to date were $7,590,000 and the estimated total costs to complete had not changed. The progress billings during 2015 were $3,600,000 and the cash collected during 2015 was 2,400,000.

For the year ended December 31, 2015, Cooper would recognize gross profit on the building of:

Cooper Construction Company had a contract starting April 2015, to construct a $18,000,000 building that is expected to be completed in September 2017, at an estimated cost of $16,500,000. At the end of 2015, the costs to date were $7,590,000 and the estimated total costs to complete had not changed. The progress billings during 2015 were $3,600,000 and the cash collected during 2015 was 2,400,000.

At December 31, 2015 Cooper would report Construction in Process in the amount of:

Hayes Construction Corporation contracted to construct a building for $4,500,000. Construction began in 2014 and was completed in 2015. Data relating to the contract are summarized below:
Year ended
December 31,
2014 2015
Costs incurred $1,800,000 $1,350,000
Estimated costs to complete 1,200,000 —
Hayes uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2014, and 2015, respectively, Hayes should report gross profit of

Monroe Construction Company uses the percentage-of-completion method of accounting. In 2015, Monroe began work on a contract it had received which provided for a contract price of $25,000,000. Other details follow:
2015
Costs incurred during the year $12,000,000
Estimated costs to complete as of December 31 8,000,000
Billings during the year 11,000,000
Collections during the year 6,500,000
What should be the gross profit recognized in 2015?

In 2015, Fargo Corporation began construction work under a three-year contract. The contract price is $4,800,000. Fargo uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2015, follow:
Balance Sheet
Accounts receivable—construction contract billings $200,000
Construction in progress $600,000
Less contract billings 480,000
Costs and recognized profit in excess of billings 120,000

Income Statement
Income (before tax) on the contract recognized in 2015 $120,000

How much cash was collected in 2015 on this contract?

In 2015, Fargo Corporation began construction work under a three-year contract. The contract price is $4,800,000. Fargo uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2015, follow:
Balance Sheet
Accounts receivable—construction contract billings $200,000
Construction in progress $600,000
Less contract billings 480,000
Costs and recognized profit in excess of billings 120,000

Income Statement
Income (before tax) on the contract recognized in 2015 $120,000

What was the initial estimated total income before tax on this contract?

Adler Construction Co. uses the percentage-of-completion method. In 2014, Adler began work on a contract for $6,600,000 and it was completed in 2015. Data on the costs are:
Year Ended December 31
2014 2015
Costs incurred $2,340,000 $1,680,000
Estimated costs to complete 1,560,000 —
For the years 2014 and 2015, Adler should recognize gross profit in 2014 and 2015 of
2014 2015

Gomez, Inc. began work in 2014 on contract #3814, which provided for a contract price of $14,400,000. Other details follow:
2014 2015
Costs incurred during the year $2,400,000 $7,350,000
Estimated costs to complete, as of December 31 7,200,000 0
Billings during the year 2,700,000 10,800,000
Collections during the year 1,800,000 11,700,000

Assume that Gomez uses the percentage-of-completion method of accounting. The portion of the total gross profit to be recognized as income in 2014 is

Kiner, Inc. began work in 2014 on a contract for $16,800,000. Other data are as follows:
2014 2015
Costs incurred to date $7,200,000 $11,200,000
Estimated costs to complete 4,800,000 —
Billings to date 5,600,000 16,800,000
Collections to date 4,000,000 14,400,000

If Kiner uses the percentage-of-completion method, the gross profit to be recognized in 2014 is

Horner Construction Co. uses the percentage-of-completion method. In 2014, Horner began work on a contract for $16,500,000; it was completed in 2015. The following cost data pertain to this contract:
Year Ended December 31
2014 2015
Cost incurred during the year $5,850,000 $4,200,000
Estimated costs to complete at the end of year 3,900,000 —
The amount of gross profit to be recognized on the income statement for the year ended December 31, 2015 is

Horner Construction Co. uses the percentage-of-completion method. In 2014, Horner began work on a contract for $16,500,000; it was completed in 2015. The following cost data pertain to this contract:
Year Ended December 31
2014 2015
Cost incurred during the year $5,850,000 $4,200,000
Estimated costs to complete at the end of year 3,900,000 —

If the completed-contract method of accounting was used, the amount of gross profit to be recognized for years 2014 and 2015 would be
2014 2015

Remington Construction Company uses the percentage-of-completion method. During 2014, the company entered into a fixed-price contract to construct a building for Sherman Company for $24,000,000. The following details pertain to the contract:
At December 31, 2014 At December 31, 2015
Percentage of completion 25% 60%
Estimated total cost of contract $18,000,000 $20,000,000
Gross profit recognized to date 1,500,000 2,400,000
The amount of construction costs incurred during 2015 was

Eilert Construction Company had a contract starting April 2015, to construct a $21,000,000 building that is expected to be completed in September 2016, at an estimated cost of $19,250,000. At the end of 2015, the costs to date were $8,855,000 and the estimated total costs to complete had not changed. The progress billings during 2015 were $4,200,000 and the cash collected during 2015 was $2,800,000. Eilert uses the percentage-of-completion method.

For the year ended December 31, 2015, Eilert would recognize gross profit on the building of

Eilert Construction Company had a contract starting April 2015, to construct a $21,000,000 building that is expected to be completed in September 2016, at an estimated cost of $19,250,000. At the end of 2015, the costs to date were $8,855,000 and the estimated total costs to complete had not changed. The progress billings during 2015 were $4,200,000 and the cash collected during 2015 was $2,800,000. Eilert uses the percentage-of-completion method.

For the year ended December 31, 2015, Eilert would recognize gross profit on the building of

Bruner Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In 2014, Bruner started work on a $42,000,000 construction contract that was completed in 2015. The following information was taken from Bruner's 2014 accounting records:
Progress billings $13,200,000
Costs incurred 12,600,000
Collections 8,400,000
Estimated costs to complete 25,200,000
What amount of gross profit should Bruner have recognized in 2014 on this contract?

At the beginning of 2015, Pitman Co. purchased an asset for $1,200,000 with an estimated useful life of 5 years and an estimated salvage value of $100,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.’s tax rate is 40% for 2015 and all future years.

At the end of 2015, what are the book basis and the tax basis of the asset?
Book basis Tax basis

At the beginning of 2015, Pitman Co. purchased an asset for $1,200,000 with an estimated useful life of 5 years and an estimated salvage value of $100,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.’s tax rate is 40% for 2015 and all future years.

At the end of 2015, which of the following deferred tax accounts and balances is reported on Pitman’s balance sheet?
Account _ Balance

Lehman Corporation purchased a machine on January 2, 2013, for $3,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes:
2013 $600,000 2016 $345,000
2014 960,000 2017 345,000
2015 576,000 2018 174,000
Assuming an income tax rate of 30% for all years, the net deferred tax liability that should be reflected on Lehman's balance sheet at December 31, 2014 be
Deferred Tax Liability
Current Noncurrent

Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income $ 800,000
Estimated litigation expense 2,000,000
Installment sales (1,600,000)
Taxable income $ 1,200,000

The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 30% for all years.

The income tax expense is

Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income $ 800,000
Estimated litigation expense 2,000,000
Installment sales (1,600,000)
Taxable income $ 1,200,000

The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 30% for all years.

The deferred tax asset to be recognized is

Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income $ 800,000
Estimated litigation expense 2,000,000
Installment sales (1,600,000)
Taxable income $ 1,200,000

The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 30% for all years.

The deferred tax liability—current to be recognized is