1. EXERCISE 1: Sales With Returns On March 10, 2017, Steele Company sold tool sets to Barr Hardware with terms of n/60, f.o.b. shipping point. Steele allows Barr to return any unused tool sets within 60 days of purchase. Steele estimates the cost of recovering the products will be immaterial, and the returned tools sets can be resold at a profit. On March 25, 2017, Barr returned some tool sets and received a credit to its account. Information concerning the sale and return follows.

2. EXERCISE 2:Sales With Allowances On October 2, 2017, Laplante Company sold elite camping gear to Lynch Outfitters. As part of the sales agreement, Laplante includes a provision that if Lynch is dissatisfied with the product, Laplante will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Laplante and Lynch). October 16, 2017, Laplante grants an allowance to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. Additional information concerning the sale follows:

see attachment for instructions

EXERCISE 1: Sales With Returns On March 10, 2017, Steele Company sold tool sets to Barr Hardware with terms of n/60, f.o.b. shipping point. Steele allows Barr to return any unused tool sets within 60 days of purchase. Steele estimates the cost of recovering the products will be immaterial, and the returned tools sets can be resold at a profit. On March 25, 2017, Barr returned some tool sets and received a credit to its account. Information concerning the sale and return follows. Number of tool sets sold Selling price of each tool set Cost of each tool set Number of sets estimated to be returned Number of tool sets returned by Barr $ $ 200 50.00 30.00 10 6 Instructions: (a) Prepare journal entries for Steele to record (1) the sale on March 10, 2017, (2) the return on March 25, 2017, and (3) any adjusting entries required on March 31, 2017 (when Steele prepares financial statements). Steele believes the original estimate of returns is correct. (1) Mar. 10 Debit Credit (2) Mar. 25 Debit Credit (3) Mar. 31 Debit Credit (b) Indicate the income statement and balance sheet reporting by Steele at March 31, 2017, of the information related to the Barr sales transaction. Income Statement (partial) For the Quarter Ended March 31, 2017 Balance Sheet (partial) At March 31, 2017 EXERCISE 2: Sales With Allowances On October 2, 2017, Laplante Company sold elite camping gear to Lynch Outfitters. As part of the sales agreement, Laplante includes a provision that if Lynch is dissatisfied with the product, Laplante will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Laplante and Lynch). October 16, 2017, Laplante grants an allowance to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. Additional information concerning the sale follows: Sales price of camping gear Cost of gear sold Expected total allowances to Lynch Allowance granted to Lynch on October 16, 2017 $ 6,000 3,600 800 400 Instructions: (a) Prepare journal entries for Laplante to record (1) the sale on October 2, 2017, (2) the granting of the allowance on October 16, 2017, and, (c) any adjusting required on October 31, 2017 (when Laplante prepares financial statements). Laplante now estimates additional allowances of $250 will be granted to Lynch in the future. (1) Oct. 2 Debit Credit (2) Oct. 16 Debit Credit (3) Oct. 31 Debit Credit (b) Indicate the income statement and balance sheet reporting by Laplante at October 31, 2017, of the information related to the Lynch transaction. Income Statement (partial) For the Month Ended October 31, 2017 Balance Sheet (partial) At October 31, 2017 EXERCISE 3: Gross Profit on Uncompleted Contract On April 1, 2017, Dougherty Inc. entered into a cost-plus-fixed-fee contract to construct an electric generator for Altom Corporation. At the contract date, Dougherty estimated that it would take 2 years to complete the project. Additional information on the project follows: Estimated cost to complete the project at the contract date Fixed fee stipulated in the contract Cost incurred during 2017 on the project Estimated cost at December 31, 2017, to complete the project Amount billed to Altom under the contract $ 2,000,000 450,000 800,000 1,200,000 600,000 Dougherty appropriately accounts for this contract under the percentage-of-completion method. (AICPA adapted) Instructions: Prepare a schedule to compute the amount of gross profit to be recognized by Dougherty under the contract for the year ended December 31, 2017. DOUGHERTY INC. Computation of Gross Profit to Be Recognized on Uncompleted Contract For The Year Ended December 31, 2017 EXERCISE 4: Recognition of Profit on Long-Term Contract Shanahan Construction Company has entered into a contract beginning January 1, 2017, to build a parking complex. It is estimated that the complex will take 3 years to construct. Additional information follows. Estimated cost of complex Amount to be billed to the purchasing company $ 600,000 900,000 The following data pertain to the construction period. Costs to date Estimated costs to complete Progress billings to date Cash collected to date $ 2017 270,000 $ 330,000 270,000 240,000 2018 450,000 $ 150,000 550,000 500,000 2019 610,000 900,000 900,000 Instructions: (a) Using the percentage-of-completion method, compute the estimated gross profit to be recognized during each year of the construction period. 2017 Calculation of gross profit to be recognized: 2017: 2018: 2018 2019 2019: (b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period. EXERCISE 5: Long-Term Contract with an Overall Loss On July 1, 2017, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2019, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2017, 2018, and 2019. Total contract price $ 1,900,000 Contract costs incurred to date Estimated costs to complete the contract Billings to Gumbel At 12/31/17 At 12/31/18 At 12/31/19 $ 300,000 $1,200,000 $2,100,000 1,200,000 800,000 0 300,000 1,100,000 1,850,000 Instructions: (a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) 2017 2018 2019 (b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) 2017 2018 2019