Question 17 The board of directors of Skysong Construction Company is meeting to choose between the completed-contract method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Skysong's controller in the preparation of a presentation to be given at the board meeting. The controller provides you with the following information: 1. Skysong commenced doing business on January 1, 2021. 2. Construction activities for the year ended December 31, 2021, were as follows: Project A B Total Contract Billings Through Price 12/31/21 $ 494,000 $ 334,000 714,000 204,000 472,000 469,000 197,000 94,000 444,000 394,000 $2,321,000 $1,495,000 Cash Collections Through 12/31/21 $ 304,000 204,000 384,000 62,000 394,000 $1,348,000 Contract Costs Estimated Incurred Through Additional Costs to 12/31/21 Complete Contracts $ 418,000 $ 95,000 186.000 434,000 344,000 -0- 117,000 91,000 314,000 78,500 $1,379,000 $698,500 D E 3. Each contract is with a different customer. 4. Any work remaining to be done on the contracts is expected to be completed in 2022. Compute the amount of income (or loss) before selling, general, and administrative expenses for the year ended December 31, 2021, which would be reported under: (1) The completed-contract method. (2) The percentage-of-completion method (based on estimated costs). $ SHOW LIST OF ACCOUNTS Prepare the general journal entry to record revenue and gross profit on project B (second project) for 2021, assuming that the percentage-of-completion method is used. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS Indicate the balances that would appear in the balance sheet at December 31, 2021 for the following accounts for Project D (fourth project), assuming that the percentage-of-completion method is used. Accounts Receivable $ Billings on Construction in Process Construction in Process $ SHOW LIST OF ACCOUNTS How would the balances in the accounts discussed in part (C) change (if at all) for Project D (fourth project), if the completed-contract method is used? If the completed-contract method is used the account balances SHOW LIST OF ACCOUNTS would increase would be the same would decrease Accounts Receivable Accounts Receivable (Net) Advertising Expense Allowance for Sales Returns Billings on Construction in Process Cash Cash, Labor, Parts Commission Expense Construction in Process Construction Expenses Cost of Goods Sold Cost of Installment Sales Deferred Gross Profit Delivery Expense Discount on Notes Receivable Estimated Inventory Returns Franchise Revenue Freight-Out Gain on Repossession Income Summary Installment Accounts Receivable Installment Sales Revenue Inventory Inventory on Consignment Loss from Long-Term Contracts Loss on Repossession Materials, Cash, Payables No Entry Notes Receivable Operating Expenses Parts Expense Purchases Realized Gross Profit Rent Revenue Repossessed Merchandise Retained Earnings Returned Inventory Revenue from Consignment Sales Revenue from Long-Term Contracts Sales Discounts Sales Discounts Forfeited Sales Revenue Service Revenue Unearned Franchise Revenue Unearned Sales Revenue Unearned Service Revenue Unearned Rent Revenue Unearned Warranty Revenue Warranty Expense Warranty Liability Question 17 The board of directors of Skysong Construction Company is meeting to choose between the completed-contract method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Skysong's controller in the preparation of a presentation to be given at the board meeting. The controller provides you with the following information: 1. Skysong commenced doing business on January 1, 2021. 2. Construction activities for the year ended December 31, 2021, were as follows: Project A B Total Contract Billings Through Price 12/31/21 $ 494,000 $ 334,000 714,000 204,000 472,000 469,000 197,000 94,000 444,000 394,000 $2,321,000 $1,495,000 Cash Collections Through 12/31/21 $ 304,000 204,000 384,000 62,000 394,000 $1,348,000 Contract Costs Estimated Incurred Through Additional Costs to 12/31/21 Complete Contracts $ 418,000 $ 95,000 186.000 434,000 344,000 -0- 117,000 91,000 314,000 78,500 $1,379,000 $698,500 D E 3. Each contract is with a different customer. 4. Any work remaining to be done on the contracts is expected to be completed in 2022. Compute the amount of income (or loss) before selling, general, and administrative expenses for the year ended December 31, 2021, which would be reported under: (1) The completed-contract method. (2) The percentage-of-completion method (based on estimated costs). $ SHOW LIST OF ACCOUNTS Prepare the general journal entry to record revenue and gross profit on project B (second project) for 2021, assuming that the percentage-of-completion method is used. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS Indicate the balances that would appear in the balance sheet at December 31, 2021 for the following accounts for Project D (fourth project), assuming that the percentage-of-completion method is used. Accounts Receivable $ Billings on Construction in Process Construction in Process $ SHOW LIST OF ACCOUNTS How would the balances in the accounts discussed in part (C) change (if at all) for Project D (fourth project), if the completed-contract method is used? If the completed-contract method is used the account balances SHOW LIST OF ACCOUNTS would increase would be the same would decrease Accounts Receivable Accounts Receivable (Net) Advertising Expense Allowance for Sales Returns Billings on Construction in Process Cash Cash, Labor, Parts Commission Expense Construction in Process Construction Expenses Cost of Goods Sold Cost of Installment Sales Deferred Gross Profit Delivery Expense Discount on Notes Receivable Estimated Inventory Returns Franchise Revenue Freight-Out Gain on Repossession Income Summary Installment Accounts Receivable Installment Sales Revenue Inventory Inventory on Consignment Loss from Long-Term Contracts Loss on Repossession Materials, Cash, Payables No Entry Notes Receivable Operating Expenses Parts Expense Purchases Realized Gross Profit Rent Revenue Repossessed Merchandise Retained Earnings Returned Inventory Revenue from Consignment Sales Revenue from Long-Term Contracts Sales Discounts Sales Discounts Forfeited Sales Revenue Service Revenue Unearned Franchise Revenue Unearned Sales Revenue Unearned Service Revenue Unearned Rent Revenue Unearned Warranty Revenue Warranty Expense Warranty Liability