Problem 18-1 (Time 30-45 minutes)
Purpose—the student defines and describes the point of sale, completion of production, percentage-of- completion, and installment sales methods of revenue recognition. Then the student computes revenue to be recognized in situations using a percentage-of-completion method, when the right of return exists, and using the point of sale method.
Problem 18-2 (Time 20-25 minutes)
Purpose—to provide the student with an understanding of both the percentage-of-completion and com- pleted-contract methods of accounting for long-term construction contracts. The student is required to compute the estimated gross profit that would be recognized during each year of the construction pe- riod under each of the two methods.
Problem 18-3 (Time 25-35 minutes)
Purpose—to provide the student with an understanding of the percentage-of-completion method of ac- counting for long-term construction contracts. The student is required to compute the estimated gross profit during the three-year period using the percentage-of-completion method, and to prepare the nec- essary journal entries to record the events which occurred during the last year.
Problem 18-4 (Time 20-30 minutes)
Purpose—to provide the student with an understanding of both the accounting procedures involved un- der the percentage-of-completion method and the respective balance sheet presentation for long-term construction contracts. The student is required to compute the estimated gross profit realized during the construction periods, plus prepare a partial balance sheet showing the balances in the receivable and inventory accounts.
Problem 18-5 (Time 25-30 minutes)
Purpose—to provide the student with a multiple long-term project problem applying the percentage-of- completion method. The student is also required to prepare the income statement and balance sheet presentations for this uncompleted project.
Problem 18-6 (Time 20-25 minutes)
Purpose—to provide the student with a long-term construction contract problem that requires the recog- nition of a loss during an interim year on a contract that is profitable overall. This problem requires ap- plication of both the percentage-of-completion method and the completed-contract method to an interim loss situation.
Problem 18-7 (Time 20-25 minutes)
Purpose—to provide the student with a long-term construction contract problem that requires the recog- nition of a loss during an interim year on an unprofitable contract overall. This problem requires appli- cation of both the percentage-of-completion method and the completed-contract method to this unprof- itable contract.
Problem 18-8 (Time 25-30 minutes)
Purpose—to provide the student with an understanding of the proper accounting under the installment sales method. The student is required to compute the realized gross profit for each of the years, plus prepare the necessary journal entries to record the transactions applying the installment method of ac- counting.
Problem 18-9 (Time 30-35 minutes)
Purpose—to provide the student with an understanding of the installment method of accounting for sales transactions. The student is required to determine the net income for each of three years, utilizing the installment sales method.
Time and Purpose of Problems (Continued)
Problem 18-10 (Time 30-40 minutes)
Purpose—to provide the student with an understanding of the applications of the installment method of accounting for sales transactions. The student is required to analyze the trial balance and accompany- ing information of a company, and to compute the rate of gross profit on the company’s installment sales. The student is also asked to prepare both the closing entries under the installment method of ac- counting and an income statement for the year, including only the realized gross profit in the statement.
Problem 18-11 (Time 20-25 minutes)
Purpose—to provide the student with an understanding of the proper accounting on the installment sales basis. The student is required to prepare the respective journal entries to reflect the sales trans- actions, including the entry to record the gross profit realized during the year.
Problem 18-12 (Time 40-50 minutes)
Purpose—to provide the student with an understanding of the applications of the installment sales method of accounting. The student is required to analyze the company’s trial balance and accompany- ing information, and to prepare the adjusting and closing entries for the year. The student is also asked to prepare an income statement for the year, including only the realized gross profit in the statement.
Problem 18-13 (Time 20-25 minutes)
Purpose—to provide the student with an understanding of the proper entries under the installment method of accounting. The student is required to prepare the necessary journal entries to reflect the re- spective sales transactions, including that of a merchandise repossession.
Problem 18-14 (Time 50-60 minutes)
Purpose—to provide the student with an understanding of the installment method of accounting for sales. The student is required to prepare schedules for the cost of goods sold on installments, the gross profit percentage on the sales, the gain or loss on repossessions, and the net income from installment sales.
Problem 18-15 (Time 20-30 minutes)
Purpose—to provide the student with a problem requiring the computation of “cost of uncompleted contract in excess of related billings” or “billings on uncompleted contract in excess of related costs” and “profit or loss.” Each of these computations is required for each year of the three-year contract ap- plying the completed-contract method.
Problem 18-16 (Time 40-50 minutes)
Purpose—to provide the student with an understanding of how to write a letter comparing the percent- age-of-completion method to the completed-contract method.
Problem 18-17 (Time 50-60 minutes)
Purpose—to provide the student with an understanding of how to compute gross profit on five different contracts. In addition, partial balance sheet and income statement data must be prepared.