The following information pertains to Florida Construction Company and Qatar Tunnel Company: Cash receipts during the year
Question:
The following information pertains to Florida Construction Company and Qatar Tunnel Company:
Cash receipts during the year | Invoices during the year | Estimated costs up to the end of the year | Costs incurred during the year | |
359,375 | 421,875 | 650,000 | 78,125 | 2014 |
234,375 | 195,313 | 587,500 | 75,000 | 2015 |
265,625 | 265,625 | 531,250 | 120,313 | 2016 |
171,875 | 177,344 | 397,500 | 48,438 | 2017 |
218,750 | 189,844 | 261,250 | 62,500 | 2018 |
207,031 | 234,668 | 153,750 | 498,828 | 2019 |
144,531 | 121,387 | 97,500 | 55,078 | 2020 |
160,156 | 156,543 | 56,250 | 77,734 | 2021 |
113,281 | 112,402 | 0 | 37,109 | 2022 |
Required:
1. Discussing some of the challenges facing accountants around the world when conducting international accounting transactions. (3 degrees)
2. Assuming that US GAAP is followed by a US company, discuss the accounting methods that can be used to recognize revenue when there is significant uncertainty about collecting cash associated with the sales being sold. In installments (whenever possible, please support your answer with numerical examples). (3 degrees)
3. Answer the following questions about the Florida Construction Company and the Qatar Tunnel Company:
a. Does Mr. East agree that at the end of 2016, his company made a higher profit from the project than the Florida Construction Company had earned from the project? Evidence must be provided to support your position. (3 degrees)
B. Does Mr. West agree that his company has increased its total assets from the project at the end of 2016 compared to the method used by Qatar Tunnel Company (please focus only on construction work in progress, invoices on construction contract and receivables)? Evidence must be provided to support your position. (3 degrees)
T. Assume that the percentage of completion method was available to Qatar Tunnel Company at the beginning of the project in 2014. Suppose also that the company compares its current method with the percentage method. Based on the results at the end of 2016 and 2021, which of the two methods provides the following:
Less expenses.
Highest net income.
Top Total Assets (please focus only on construction work in progress, invoices on construction contract and receivables). (3 degrees)
Note about rounding:
Please round all numbers to the nearest dollar. For example, if the value of construction work-in-progress is $150,667.62689, it should be rounded up to $150,668.
When using the percentage complete method, be sure to round the percentage to four decimal places. For example, if you get the following result 0.7512869, your answer should be 0.7513 or 75.13%.