Question 1.

Heston Preskell, Inc., a commercial contractor, signed a contract during Year 1 for $808,000 to build an office building for the YMCA. Heston Preskell completed 30% of the work during Year 1 and the remaining 70% during Year 2. The cost of acquired production materials during Year 1 by Heston Preskell was $195,000 and an additional $330,000 during Year 2. Heston Preskell uses the percentage of completion method of revenue recognition. Heston Preskell billed the YMCA $225,000 in Year 1 and the final $580,000 in Year 2. The YMCA paid $210,000 in Year 1, $440,000 in Year 2, and the balance in Year 3.

Calculate the following amounts for the year ending December 31, Year 1

Accounts receivable $

Production-in-progress $

Revenue recognized $

Gross profit $

Question 2

WW Guy Contractors began a contract to build a new student union on the UNF campus during Year 1 for $455,000. Information concerning the project follows:

	Year 1	Year 2	Year 3
Percentage of work completed	25%	35%	40%
Costs incurred during the year	$86,000	$124,000	$ 90,000
Progress billings during the year	80,000	180,000	190,000
Cash collected during the year	65,000	170,000	215,000

How much revenue should WW Guy recognize during Year 1 if WW Guy uses the completed contract method?

Question 3

Warner Sports changed its credit terms from 2/10, n/30 to 1/10, n/45. What will most likely happen to its accounts receivable collection period?

Question 4

Holmes Company received a purchase order for goods it had in stock in December. The customer has asked Holmes to hold the goods for several months until it is ready for them. Can Holmes recognize revenue in December?

Question 5

A firm has accounts receivable of $95,000 and an existing positive balance of $900 in the Allowance for Uncollectible Accounts (ie. the bad debt expense had been over estimated in the prior period). One half of the accounts receivable are current and one half is past due. The firm estimates that 2 percent of the current accounts and 5 percent of the past due accounts will prove to be uncollectible. What is the bad debt expense for the current period?

Question 6

Rainbow Company uses the percentage of credit sales approach to estimate its expected credit losses. It estimates its losses at 1 percent of credit sales, which were $755,000 during the year. The Accounts Receivable balance was $225,000 and the Allowance for Uncollectible Accounts had an existing negative balance of $1,000 at year-end. (ie. the bad debt expense had been under estimated in the prior period).

Question 7

Humphrey & Company has beginning inventory of $300, ending inventory of $605, cost of goods sold of $905, and sales revenue of $1,200.

What is the companys inventory-on-hand period?

Humphrey & Company has been selling clocks for $500 each that had cost $152. By year end, the replacement cost of the clocks had declined to $127, and consequently, the company decided to reduce its selling price to $450.

At what value should the companys inventory of clocks be valued at on December 31, its year end?

Humphrey & Company had the following transactions:

April 1, Beginning Inventory:	20 clocks @ $105 each = $2,100
April 10, Purchase:	10 clocks @ $127 each = $1,270
April 20, Purchase:	10 clocks @ $125 each = $1,250
April 25, Sales of inventory	25 clocks @ $500

What is the companys cost of goods sold using weighted-average cost?

Question 8

The following information was disclosed in the annual report of Trans Technologies:

Amounts in millions	Year 2	Year 1
Sales	$3,540	$2,700
Cost of goods sold	2,880	2,540
Income before taxes	425	520
Inventory	650	580

In addition, the companys footnotes revealed:

The effect of using LIFO to value inventory, rather than FIFO, increased the cost of sales in Year 1 and Year 2 by $28.2 million and $66.7 million, respectively.

Calculate Trans Technologies cost of goods sold and income before income taxes for Year 2 assuming the use of FIFO rather than LIFO.

Cost of Goods Sold $ million

Income before taxes $ million