1. Allocate Transaction Price, Discounts, Time Value.

Master Grill Company sells outdoor grilling products, providing gas and charcoal grills, accessories, and installation services for custom patio grilling stations. Instructions Respond to the requirements related to the following independent revenue arrangements for Master Grill products and services.

(a) Master Grill offers contract MG100 which is comprised of a free-standing gas grill for small patio use plus installation to a customers gas line for a total price $700. On a standalone basis, the grill sells for $600 (cost $350), and Master Grill estimates that the fair value of the installation service (based on cost-plus estimation) is $150. Master Grill signed 15 MG100 contracts on May 30, 2014, and customers paid the contract price in cash. The grills were delivered and installed on June 15, 2014. Prepare journal entries for Master Grill for MG100 in May and June 2014.

(b) Master Grill sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for $900 (cost $500) on credit with terms 2/20, net/60. Prepare the journal entries for the sale of 20 grills on August 1, 2014, and upon payment, assuming the customer paid on (1) August 20, 2014, and (2) September 29, 2014. Assume the company records sales net.

2) Long-term construction project accounting.

Dobson Construction specializes in the construction of commercial and industrial buildings. The contractor is experienced in bidding long-term construction projects of this type, with the typical project lasting fifteen to twenty-four months. The contractor uses the percentage-of-completion method of revenue recognition since, given the characteristics of the contractor's business and contracts, it is the most appropriate method. Progress toward completion is measured on a costto-cost basis. Dobson began work on a lump-sum contract at the beginning of 2015. As bid, the statistics were as follows:

Lump-sum price (contract price) $4,000,000

Estimated costs

Labor $ 850,000

Materials and subcontractor 1,750,000

Indirect costs 400,000 3,000,000

$1,000,000

At the end of the first year, the following was the status of the contract:

Billings to date $2,250,000

Costs incurred to date

Labor $ 464,000

Materials and subcontractor 648,000

Indirect costs 193,000 1,305,000

Latest forecast total cost 3,000,000

It should be noted that included in the above costs incurred to date were standard electrical and mechanical materials stored on the job site, but not yet installed, costing $105,000. These costs should not be considered in the costs incurred to date.

Instructions

(a) Compute the percentage of completion on the contract at the end of 2015.

(b) Indicate the amount of gross profit that would be reported on this contract at the end of 2015.

(c) Make the journal entry to record the income (loss) for 2015 on Dobson's books.

(d) Indicate the account(s) and the amount(s) that would be shown on the balance sheet of Dobson Construction at the end of 2015 related to its construction accounts. Also indicate where these items would be classified on the balance sheet. Billings collected during the year amounted to $1,900,000.

(e) Assume the latest forecast on total costs at the end of 2015 was $4,060,000. How much income (loss) would Dobson report for the year 2015?