Problem 2

Jamison Construction Company won a contract to build a warehouse for Fresno Company. The contract price was $8,600,000. Jamison estimated that the warehouse would take three years and cost $7,200,000 to complete. Actual and expected costs for the next three years were: Year 1 - $3,240,000, Year 2 - $2,520,000 and year 3 - $1,440,000 Required: 1. Determine how much revenue and gross profit Jamison should recognize each year using the cost-to-cost method. 2. What is the major drawback of the cost-to-cost method? 3. How do we classify advance payments and billings in excess of cost when using the cost-to-cost method? 4. How do we classify costs incurred in excess of billings when using the cost-to-cost method? Problem

Problem 3

Bryant Company had the following account balances on December 31st, 2018, before any adjustments. Bryant had $588,500 of sales throughout the year, of which $385,000 were credit sales.

Accounts Receivable $77,250

Allowance for uncollectible accounts 1,750

Required:

1. On December 31st, Bryant estimated the Allowance for Doubtful Accounts to be 1% of credit sales. What amount would Bryant report as Bad Debt Expense on the Income Statement? What is the ending balance in the Allowance for uncollectible accounts after the adjustment? What amount would Bryant report as Net Receivables on the Balance Sheet? Show your work for ALL parts.

2. Compute Bryants Receivables Turnover Ratio and Days Sales Outstanding. What do these ratios tell us about Bryants management of their receivables? (Use the end-of- net receivables and credit sales for your ratios).

3. On December 31, 2018 Bryant does an aging of receivables and determines that $500 of the receivables will not be collected. How would they record this write-off? (You can either explain which accounts will increase/decrease, you can prepare a journal entry or map it on a Financial Statements Effects Template.)

4. What will Bryant report as net receivables AFTER the write-off?

5. Bryant sells goods with the discount terms 2/15, n30. What does this mean? What is the primary reason that sellers do this?

Bonus 20 points total

Ignoring parts 1-5 above assume, instead, that Bryant does an aging schedule to determine the amount of uncollectible accounts. They determine the following: Days Outstanding Amount % uncollectible Current $36,800 1% 1-60 days past due $22,400 4% 61-180 days past due $14,200 13% Over 180 days past due $3,850 50%

1. Complete the aging schedule above to determine the amount of receivables that are expected to be uncollectible for the period.

2. How much will Bryant report as Bad Debt Expense on the Income Statement? (Hint: do a T-account of your Allowance for Uncollectible Accounts to determine the amount needed to achieve the ending balance that you calculated in your aging schedule. Be sure to show your work. You can refer to M5-18 from the review problems for assistance.

3. What amount would Bryant report as Net Receivables on the Balance Sheet?