Latihan Soal Akuntansi Keuangan Menengah 2

Recognition of profit and entries on long-term contract

On March 1, 2008, Winter Company entered into a contract to build an apartment

building. It is estimated that the building will cost $2,000,000 and will take 3 years

to complete. The contract price was $3,000,000. The following information pertains

to the construction period:

                                                      2008                         2009                            2010

Cost to date                               600,000                    1,560,000                    2,100,000

Estimated costs to complete   1,400,000                       390,000                    0

Progress billings to date          1,050,000                    2,100,000                    3,000,000

Cash collected to date               950,000                    1,950,000                    2,750,000

Instructions

1. Compute the amount of gross profit to be recognized each year assuming the percentage-of-completion method is used.
2. Prepare all necessary journal entries for 2010.
3. Prepare a partial balance sheet for December 31, 2009, showing the balances in receivables and inventory accounts.

(Lessee Entries; Capital Lease with Executory Costs and Unguaranteed Residual Value)

On January 1, 2008, Lahey Paper co. signs a 10-year noncancelable lease

agreement to lease a storage building from Sheffield Storage Company. The

following information pertains to this lease agreement:

1. The agreement requires equal rental payments of $72,000 beginning on January 1, 2008.
2. The fair value of the building on January 1, 2008 is $440,000.
3. The building has an estimated economic life of 12 years, with an unguaranteed residual value of $10,000. Lahey Paper Co. depreciates similar buildings on the straight-line method.
4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.
5. Lahey Paper’s incremental borrowing rate is 12% per year. The lessor’s implicit rate is not known by Lahey Paper Co.
6. The yearly rental payment includes $2,470.51 of executory cost related to taxes on the property.

Instructions

Prepare the journal entries on the lessee’s books to reflect the signing of the lease

agreement and to record the payments and expenses related to this lease for the

 years 2008 and 2009. Lahey Paper’s corporate year end is December 31.