PARTI After passing the accreditation for the practice of engineering, Razul Burahan, decided to practice his profession. On January 1, 2019, he created a business named 'RB Engineering and Consultancy'. The business has a year-end of December 31. During 2019, the following transactions were occurred. a) On January 1, Razul invested $52,000 cash and equipment valued at $90,000 into the business. b) On January 1, RB Engineering and Consultancy signs a contract to build a hotel. The construction is scheduled to begin on January 5, 2019 and is estimated to take four years to complete. The business expects that its total cost for this project would be $125 million and charges its client $160 million in total. Received $20 million cash advance from client upon signing the contract. Based on the given actual costs incurred, complete the following table showing the percentage of completion, revenue recognized and gross profit for each year. Assume RB Engineering and Consultancy uses the percentage-of- completion method for revenue recognition. 7 Year Costs Incurred Percentage of Completion Revenue Recognized* Gross Profit 2019 $13 2020 $32 2021 $35 2022 $45 Total $125 *The numbers are in million dollars. c) On January 15, rendered consultancy service to Confex Co. amounting to $14,000 on account. On February 1, Confex Co. is having cash flow problems and cannot pay the outstanding amounts on time. They agreed to convert the accounts receivable into a one-year note. RB Engineering and Consultancy required annual interest of 9%, which will be collected when the note becomes due. d) On March 1, RB Engineering and Consultancy borrowed cash from the bank and signed a $110,000, 1-year, 12% per annum note. Paid the note in full upon maturity. e) On April 1, rendered consultancy service to Design Co.. Design Co. has signed a one-month note for $18,000. The RB Engineering and Consultancy requires annual interest of 12%, which will be collected when the note becomes due. On maturity date, April 30, the note was dishonoured. Collected the total amount on July 1. f) On June 30, RB Engineering and Consultancy purchased land - fair value at $750,000, a building-fair value at $1,350,000 and parking lot -fair value at $700,000. RB Engineering and Consultancy paid $2,100,000 cash for these three. g) On August 1, rendered consulting service to Zarah Co. amounting to $20,000 on account. On August 15, RB Engineering and Consultancy decided to sell a full receivable to a factor in exchange for cash. They arranged with its bank to sell $20,000 of its receivable. The bank will charge 2.8% of factoring fees. h) On December 31, because of poor credit controls, RB Engineering and Consultancy has a high rate of bad debts. The business uses the balance sheet approach. The year end balance for the allowance for doubtful accounts will be based on the ageing schedule shown below: Complete the table for the estimated amount of bad debt of each aging category 3 Estimated Amount of Bad Debt Aging Category Less than 20 days 20 - 30 days 31 -60 days 61 - 90 days 91 - 120 days Over 120 days Bad Debt 1.5% 2.0% 3.0% 7.0% 15.0% Balance $125,000 $150,000 $53,000 $13,000 $11,000 $15,000 30.0% i) The following are the property, plant and equipment at December 31: a) The equipment that was invested by Razul, $90,000, uses the double-declining balance method to depreciate the equipment and the equipment has an expected useful life of 5 years with a total residual value of $8,000. Prepare a schedule to record the depreciation expense, accumulated depreciation and net book value for five years. 10 Year Beginning of Year Book Value Depreciation Expense Accumulated Depreciation Net Book Value 2019 2020 2021 2022 2023 b) The building that was purchased in the middle of the year, June 30, has an estimated useful life of 10 years and no residual value. Complete the five-year schedule. RB Engineering and Consultancy uses the actual number of months to depreciate the building in 2019 and full depreciation in the following years. 10 Year Cost of the Building Depreciation Expense Accumulated Depreciation Net Book Value 2019 2020 2021 2022 2023 Prepare journal entries for the above transactions. Do some adjustments at December 31. For the transaction 'b', make a journal entry for the unearned income and income earned