Question 5.1 (Total: 20 marks; 2 marks per line)

On January 1, 2022, Winter Harvest Ltd. started a construction project for $ 4,500,000. Relevant data for 2022 and 2023 are as follows:

	2022	2023
Current year construction costs	$ 3,300,000	$ 620,000
Estimated remaining costs to complete	600,000	-0-
Current year billings	3,100,000	1,400,000
Current year collections	3,000,000	1,500,000

Required

1. Calculate the following amounts for each method:

	Completed Contract	Percentage of Completion
	2022	2023	2022	2023
Gross Profit	$ ?	$ ?	$ ?	$ ?
Construction in progress year-end balance.	$ ?	$ ?	$ ?	$ ?
Costs in excess of billings (Billings in excess of costs)	$ ?	$ ?	$ ?	$ ?

Question 5.2 (Total: 24 marks; -2 marks per error)

On August 15, 2022, Didgeridoo consigned 500 electronic play systems, costing $100 each, to Toys R U Company. The cost of shipping the play systems amounted to $1,250 and was paid by Didgeridoo. On December 31, 2022, an account sales summary was received from the consignee, reporting that 420 play systems had been sold for $160 each. Remittance was made by the consignee for the amount due, after deducting a 20% commission. Calculate the following at December 31, 2022.

Required

1. The inventory value of the units unsold in the hands of the consignee
2. The profit for the consignor for the units sold.
3. The amount of cash that will be remitted by the consignee.

Question 5.3 (Total: 22 marks)

On December 31, 2022, Golden Egg Company sells farming equipment to Feather Inc. for $50,000. Golden Egg includes a one-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2022. Golden Egg estimates the prices to be $48,800 for the equipment and $1,200 for the cost of warranty.

Required

1. Are the sale of the equipment and the warranty separate performance obligations within the contract? Explain.
2. Prepare the journal entry to record this transaction on December 31, 2022. Ignore any related cost of goods sold entry.
3. Repeat the requirements for part 2, assuming that, in addition to the assurance warranty, Golden Egg sold an extended warranty (service-type warranty) for an additional two years (2024-2025) for $800.

Question 5.4 (Total: 24 marks)

Red Maple Co. enters into a contract to sell Product Y and Product Z on January 2, 2021, for an upfront cash payment of $150,000. Product Y will be delivered in two years (January 2, 2023) and Product Z will be delivered in five years (January 2, 2026). Red Maple Co. allocates the $150,000 to Products Y and Z on a relative stand-alone selling price basis as follows.

	Stand-Alone Selling Prices	Percent Allocated	Allocated Amounts
Product Y	$ 40,000	25%	$ 37,500
Product Z	120,000	75%	112,500
	$160,000		$150,000

Red Maple Co. uses an interest rate of 6%, which is its incremental borrowing rate.

Required

1. Prepare the journal entries needed on January 2, 2021, and December 31, 2021.
2. Prepare the journal entry needed on December 31, 2022.
3. Prepare the journal entry needed on January 2, 2023.
4. Using Excel or a financial calculator, calculate the amount of revenue to be recognized for Product B and prepare the journal entry needed on January 2, 2026.