Acc421 Intermediate Accounting: Week 3 Individual Assignments (I3-1, I3-2, I3-3, I3-4)

(UOP) Accounting 421 Intermediate Accounting
Week 3 – Individual Assignments

I3-1:
The Blue Sky Company, which has 25,000 shares of common stock outstanding, reports the following ledger balances as of December 31 after adjustments and before closing entries.
Current assets $875,000
Long term assets 4,000,000
Increase in value of inventory above cost 45,000
Current liabilities 625,000
Long term liabilities 3,000,000
Common stock 1,000,000
Retained earnings 142,000
Net sales 1,400,000
Rental revenue 42,000
Depreciation expense on fixed assets used for sales 66,000
Depreciation expense on fixed assets used for administration 28,000
Cash dividends paid 23,000
Cost of goods sold 720,000
Interest expense on notes payable 26,000
Payroll expense - sales 166,000
Payroll expense – administrative 197,000
Sales supplies expense 26,000
Other administrative expense 75,000
Income tax expense 30,000

Instructions:
(1) Prepare a multiple-step income statement in good form.
(2) Prepare a single-step income statement in good form.


I3-2:
The Grey Sky Company, which has 25,000 shares of common stock outstanding, reports the following ledger balances as of December 31 after adjustments and before closing entries.
Accounts Receivable 85,000
Inventory 150,000
Land 900,000
Accounts Payable 90,000
Common Stock 500,000
Retained Earnings (beginning of year) 238,000
Sales 1,400,000
Rent revenue 28,000
Cost of goods sold 600,000
Selling expenses 200,000
Administrative expenses 170,000
Loss on discontinued operation 50,000
Extraordinary gain 67,000
Extraordinary loss 40,000
Unrealized holding gain on available-for-sale securities 12,000
Cash dividends paid 100,000
Income tax expense applicable to:
Income from continuing operations 131,000
Loss on discontinued operations 18,000
Extraordinary gain 23,000
Extraordinary loss 8,000

Instructions:

(1) Prepare a single-step income statement for the year.
(2) Prepare a retained earnings statement for the year.
(3) Use the second income statement format to report comprehensive income.

I3-3:
The Cloudy Sky Construction Company specializes in large construction projects. In year 1, it entered into a 3 year construction project to build a slow curing bridge foundation at a total price of $6,375,000. At the conclusion of the project, the following information was compiled.
Year 1 Year 2 Year 3
Collections to date $1,147,500 $3,442,500 $6,056,250
Billings to date 1,275,000 3,825,000 6,375,000
Costs incurred to date 1,550,000 4,125,000 4,675,000
Estimated costs to complete as of the end of each year 2,500,000 725,000 0

Instructions:
(1) Assuming that Cloudy Sky uses the percentage-of-completion method, compute the amount of gross profit to be recognized each year.
(2) Prepare all necessary journal entries for each year under the percentage-of-completion method. Assume that all billings were paid in the year billed except for year 3, and that all costs were paid in cash. You may omit explanations.
(3) Assuming the use of the completed-contract method, compute the amount of gross profit to be recognized each year.
(4) Prepare all necessary journal entries for each year under the completed-contract method. Assume that all billings were paid in the year billed except for year 3, and that all costs were paid in cash. You may omit explanations.

I3-4:
The Sunny Sky Construction Company accepted a 4 year contract to construct a shopping center for a total price of $750,000,000.

As of December 31 of the first year of construction, the following items related to the construction project are presented on the financial statements.

Income Statement

Revenue from Long-Term Contracts $225,000,000
Construction Expenses 165,000,000
Net Income (before tax) $60,000,000

Balance Sheet

Accounts Receivable $45,000,000

Accounts Payable 12,000,000

Construction in process $225,000,000
Billings on construction in process 215,000,000
Cost of uncompleted contract in excess of billings 10,000,000

Instructions:
As of December 31 of year 1:
(1) What is the estimated future cost to complete the contract?
(2) What is the estimated total gross profit on the project?
(3) How much cash was collected during the year on this contract?
(4) How much cash was paid out during the year on this contract?
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