Assessment 2

Please use the following information to create the following:

Part 1: Prepare a classified balance sheet for Jordan Contracting.

Part 2: Prepare a multiple-step income statement for the D.B. Stanley Company, as well as a retained earnings statement

Part 3: Prepare a statement of cash flows using the indirect method for Falcon Company. Compute these cash basis measures. Where appropriate, show all calculations leading to the final solution (Current cash debt coverage ratio, cash debt coverage ratio, free cash flow).

Part 4: Explain the revenue recognition methods below and indicate whether each is in accordance with GAAP: point of sale, completed-contract, percentage-of-completion, installment-sales. Compute the revenue to be recognized in fiscal year 2015 for the two operating divisions of Worth More Industries in accordance with GAAP. Where appropriate, show all calculations leading to the final solution.

Edit: I have added all information from the problem. There is no additional information

Assessment 2 Information, Parts 1-4 Part 1: Classified Balance Sheet The adjusted trial balance of Jordan Contracting and other related information for the year 2018 is presented below. Adjusted Trial Balance December 31, 2018 Debits Credits S22,550 Cash Accounts Receivable 89.925 $4.785 Allowance for Doubtful Accounts Prepaid Insurance 3.245 Inventory 169,675 Long-term Investments 186,450 Land 46,750 Construction Work in Progress 68,200 Patents 19,800 Equipment 220,000 Accumulated Depreciation of Equipment Unamortized Discount on Bonds Payable 11,000 Accounts Payable Accrued Expenses Notes Payable Bonds Payable Capital Stock Premium on Capital Stock Retained Earnings 77,000 81.400 27,060 51,700 220,000 275.000 24,750 75.900 $837.595 $837,595 Additional Information 1. The LIFO method of inventory valuation is used. 2. The cost and fair value of the long-term investments consisting of stock and bonds is the same. 3. The amount of Construction Work in Progress account represents the costs expended to date on a building in the process of being constructed. The land on which the building sits cost $46,750. 4. The patents were purchased at a cost of $11,000 and are being amortized on a straight-line basis. 5. $1,000 of the unamortized discount on bonds payable will be amortized in 2019. 6. The notes payable are bank loans secured by long-term investments with a fair value of $66,000. The bank loans will mature in 2019. 7. The bonds payable have an interest rate of 11%. Interest is payable each December 31, and the bonds mature January 1, 2020. 8. 600,000 shares of $1 par value common stock are authorized and 150,000 shares have been issued and are outstanding. Part 2: Income Statement Presented below is information related to D. B. Stanley Company for 2018. Retained earnings balance, January 1, 2018 $539,000 Sales for the year 13,750,000 Cost of goods sold 9,350,000 Interest revenue 38,500 Selling and administrative expenses 2,585,000 Write-off of goodwill not tax deductible) 451,000 Income taxes for 2018 497,750 Gain on the sale of investments (normal recurring) 60,500 Loss due to flood damage-extraordinary item (net of tax) 214,500 Loss on the disposition of the wholesale division (net of tax)242,000 Loss on operations of the wholesale division (net of tax) 49,500 Dividends declared on common stock 137,500 Dividends declared on preferred stock 38,500 Part 3: Cash Flow Statement Analysis The financial statements of Falcon Company are found below. Comparative Balance Sheet December 31 A 2018 514.300 SIK. 150 Accounts receivable Merchandise inventory Property, plant, and equipment 8.500 Les Accumulated depreciative -14850 23.650 13.200 29.700 560.00 $17,050 S1.650 Lisbilities and Stockholders Fonts Accm ble Income taxes payable Bonde payable 14100 1. 11.000 5.500 13.750 Rendering Total 15.400 12.750 IR. 150 $74.250 Falon Company Income Statement For the Year Ended December 31, 2018 Sales Cost of goods sold $157.100 106.900 50.000 Selling expen Administrative expenses Income from operation $15.400 4,950 20.350 Income before income taxes Income tax expense $22.590 Additional Information Dividends of $19,800 were declared and paid. 2. During 2018 equipment was sold for $5,500 cash. The equipment originally cost $8,250 and had a book value of $5,500 at the time of the sale. All depreciation expense, $4,400, was in the selling expense category All sales and purchases were on account. 5. Additional equipment was purchased for $3,850 cash. Part 4: Revenue Recognition Worth More Industries is split into two different divisions-Clear Water Pools and Madoff Securities. Each operates with its own accounting system and revenue recognition method. Clear Water Pools For fiscal year ending November 30, 2018, Clear Water Pools worked on one construction project. It was awarded a contract for $1,650,000 on May 18, 2018, to construct a swimming pool, and the construction started on June 19, 2018. Its estimated completion costs were $1,375,000 for a 2-year time period that started at the date of the contract. On November 30, 2018, $429,000 of construction costs had been incurred and $522,500 progress billings had been made. On November 30, 2018, the construction costs to complete the project were reviewed and the estimated amount was $891,000, which was lower than projected. The change was due to a decline in raw material costs. Revenue recognition is based upon a percentage-of-completion method. Madoff Securities Madoff Securities uses manufacturers' agents who forward orders for alarm systems and the down payments. Madoff then ships its products from the factory to customers directly. The balance due is then billed directly to the customer, including shipping costs. Orders for $3,300,000 were received during the fiscal year ending November 30, 2018. Madoff received $330,000 in down payments; it billed $2,860,000 for goods and $55,000 in freight costs. Manufactures agents are paid a 10% commission on product price once goods are shipped to the customer. Madoff offers a 90- day warranty on goods after shipment, and the returns have been about 1% of sales. Revenue is recognized at the point of sale by this division. Assessment 2 Information, Parts 1-4 Part 1: Classified Balance Sheet The adjusted trial balance of Jordan Contracting and other related information for the year 2018 is presented below. Adjusted Trial Balance December 31, 2018 Debits Credits S22,550 Cash Accounts Receivable 89.925 $4.785 Allowance for Doubtful Accounts Prepaid Insurance 3.245 Inventory 169,675 Long-term Investments 186,450 Land 46,750 Construction Work in Progress 68,200 Patents 19,800 Equipment 220,000 Accumulated Depreciation of Equipment Unamortized Discount on Bonds Payable 11,000 Accounts Payable Accrued Expenses Notes Payable Bonds Payable Capital Stock Premium on Capital Stock Retained Earnings 77,000 81.400 27,060 51,700 220,000 275.000 24,750 75.900 $837.595 $837,595 Additional Information 1. The LIFO method of inventory valuation is used. 2. The cost and fair value of the long-term investments consisting of stock and bonds is the same. 3. The amount of Construction Work in Progress account represents the costs expended to date on a building in the process of being constructed. The land on which the building sits cost $46,750. 4. The patents were purchased at a cost of $11,000 and are being amortized on a straight-line basis. 5. $1,000 of the unamortized discount on bonds payable will be amortized in 2019. 6. The notes payable are bank loans secured by long-term investments with a fair value of $66,000. The bank loans will mature in 2019. 7. The bonds payable have an interest rate of 11%. Interest is payable each December 31, and the bonds mature January 1, 2020. 8. 600,000 shares of $1 par value common stock are authorized and 150,000 shares have been issued and are outstanding. Part 2: Income Statement Presented below is information related to D. B. Stanley Company for 2018. Retained earnings balance, January 1, 2018 $539,000 Sales for the year 13,750,000 Cost of goods sold 9,350,000 Interest revenue 38,500 Selling and administrative expenses 2,585,000 Write-off of goodwill not tax deductible) 451,000 Income taxes for 2018 497,750 Gain on the sale of investments (normal recurring) 60,500 Loss due to flood damage-extraordinary item (net of tax) 214,500 Loss on the disposition of the wholesale division (net of tax)242,000 Loss on operations of the wholesale division (net of tax) 49,500 Dividends declared on common stock 137,500 Dividends declared on preferred stock 38,500 Part 3: Cash Flow Statement Analysis The financial statements of Falcon Company are found below. Comparative Balance Sheet December 31 A 2018 514.300 SIK. 150 Accounts receivable Merchandise inventory Property, plant, and equipment 8.500 Les Accumulated depreciative -14850 23.650 13.200 29.700 560.00 $17,050 S1.650 Lisbilities and Stockholders Fonts Accm ble Income taxes payable Bonde payable 14100 1. 11.000 5.500 13.750 Rendering Total 15.400 12.750 IR. 150 $74.250 Falon Company Income Statement For the Year Ended December 31, 2018 Sales Cost of goods sold $157.100 106.900 50.000 Selling expen Administrative expenses Income from operation $15.400 4,950 20.350 Income before income taxes Income tax expense $22.590 Additional Information Dividends of $19,800 were declared and paid. 2. During 2018 equipment was sold for $5,500 cash. The equipment originally cost $8,250 and had a book value of $5,500 at the time of the sale. All depreciation expense, $4,400, was in the selling expense category All sales and purchases were on account. 5. Additional equipment was purchased for $3,850 cash. Part 4: Revenue Recognition Worth More Industries is split into two different divisions-Clear Water Pools and Madoff Securities. Each operates with its own accounting system and revenue recognition method. Clear Water Pools For fiscal year ending November 30, 2018, Clear Water Pools worked on one construction project. It was awarded a contract for $1,650,000 on May 18, 2018, to construct a swimming pool, and the construction started on June 19, 2018. Its estimated completion costs were $1,375,000 for a 2-year time period that started at the date of the contract. On November 30, 2018, $429,000 of construction costs had been incurred and $522,500 progress billings had been made. On November 30, 2018, the construction costs to complete the project were reviewed and the estimated amount was $891,000, which was lower than projected. The change was due to a decline in raw material costs. Revenue recognition is based upon a percentage-of-completion method. Madoff Securities Madoff Securities uses manufacturers' agents who forward orders for alarm systems and the down payments. Madoff then ships its products from the factory to customers directly. The balance due is then billed directly to the customer, including shipping costs. Orders for $3,300,000 were received during the fiscal year ending November 30, 2018. Madoff received $330,000 in down payments; it billed $2,860,000 for goods and $55,000 in freight costs. Manufactures agents are paid a 10% commission on product price once goods are shipped to the customer. Madoff offers a 90- day warranty on goods after shipment, and the returns have been about 1% of sales. Revenue is recognized at the point of sale by this division