ACC/421 Week 3 Textbook Solutions

Problem P4-4

The following account balances were included in the trial balance of Twain Corporation at June 30, 2012. Sales $1,578,500 Depreciation of office furniture and $7,250 Sales discounts 31,150       equipment Cost of goods sold 896,770 Real estate and other local taxes 7,320 Sales salaries 56,260 Bad debt expense�selling 4,850 Sales commissions 97,600 Building expense�prorated to 9,130 Travel expense�salespersons 28,930       administration Freight-out 21,400 Miscellaneous office expenses 6,000 Entertainment expense 14,820 Sales returns 62,300 Telephone and Internet expense�sales 9,030 Dividends received 38,000 Depreciation of sales equipment 4,980 Bond interest expense 18,000 Building expense�prorated to sales 6,200 Income taxes 102,000 Miscellaneous selling expenses 4,715 Depreciation understatement due to 17,700 Office supplies used 3,450       error�2009 (net of tax) Telephone and Internet expense� 2,820 Dividends declared on preferred stock 9,000       administration Dividends declared on common stock 37,000 The Retained Earnings account had a balance of $337,000 at July 1, 2011. There are 80,000 shares of common stock outstanding.

Using the multiple-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2012.

Problem P18-2

Shanahan Construction Company has entered into a contract beginning January 1, 2014, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.

2014                 2015                 2016

Costs to date                                                     $270,000           $450,000           $610,000

Estimated costs to complete                               330,000           150,000               -0- Progress billings to date                                     270,000           550,000           900,000

Cash collected to date                                         240,000           500,000             900,000

Instructions

(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.

(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.