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ACCT 382 - Week 5 - Chapter 5 Homework

ACCT 382 - Week 5 - Chapter 5 Homework
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ACCT 382 - Week 5 - Chapter 5 Homework

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Question 1

Alpine West, Inc., operates a downhill ski area near Lake Tahoe, California. An all-day, adult ticket can be purchased for $55. Adult customers also can purchase a season pass that entitles the pass holder to ski any day during the season, which typically runs from December 1 through April 30. The season pass is nontransferable, and the $450 price is non refundable. Alpine expects its season pass holders to use their passes equally throughout the season. The company's fiscal year ends on December 31.

 

Question 2

Charter Corporation, which began business in 2013, appropriately uses the installment sales method of accounting for its installment sales. The following data were obtained for sales made during 2013 and 2014:

 

2013

2014

  Installment sales

$

360,000

 

$

350,000

 

  Cost of installment sales

 

234,000

 

 

245,000

 

  Cash collections on installment sales during:

 

 

 

 

 

 

     2013

 

150,000

 

 

100,000

 

     2014

 

 

 

120,000

 


   

Question 3

The Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale called for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July 1, 2014. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $120,000. The company uses the perpetual inventory system.

 

Question 4

Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2013 and was completed in 2014. Data relating to the contract are summarized below:

 

2013

2014

  Costs incurred during the year

$

300,000

 

$

1,575,000

 

  Estimated costs to complete as of 12/31

 

1,200,000

 

 

0

 

  Billings during the year

 

380,000

 

 

1,620,000

 

  Cash collections during the year

 

250,000

 

 

1,750,000

 


   

 

Question 5

Richardson Systems sells integrated bottling manufacturing systems that involve a conveyer, a labeler, a filler, and a capper. All of this equipment is sold separately by other vendors, and the fair values of the separate equipment are as follows

 

  Conveyer

$

20,000

 

  Labeler

 

10,000

 

  Filler

 

15,000

 

  Capper

 

5,000

 

 




     Total

$

50,000

 

 








Richardson sells the integrated system for $45,000. Each of the components is shipped separately to the customer for the customer to install.

 

Question 6

Listed below are several terms and phrases associated with revenue recognition and profitability analysis.

Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.

 

 

 
   

List A

 

List B

 

1.

Inventory turnover

 

Net income divided by net sales.

 

2.

Return on assets

 

Defers recognition until cash collected equals cost.

 

3.

Return on shareholders’ equity

 

Defers recognition until project is complete.

 

4.

Profit margin on sales

.

Net income divided by assets.

 

5.

Cost recovery method

 

Risks and rewards of ownership retained by seller.

 

6.

Percentage-of-completion method

 

Contra account to construction in progress.

 

7.

Completed contract method

 

Net income divided by shareholders’ equity.

 

8.

Asset turnover

 

Cost of goods sold divided by inventory.

 

9.

Receivables turnover

 

Recognition is in proportion to work completed.

 

10.

Right of return

 

Recognition is in proportion to cash received.

 

11.

Billings on construction contract

 

Net sales divided by assets.

 

12.

Installment sales method

 

Net sales divided by accounts receivable.

 

13.

Consignment sales

 

Could cause the deferral of revenue recognition beyond delivery point.

 

 

Question 7

The following is a portion of the condensed income statement for Rowan, Inc., a manufacturer of plastic containers:

  

 

 

 

 

 

 

  Net sales

 

 

 

$

2,460,000

 

  Less: Cost of goods sold:

 

 

 

 

 

 

     Inventory, January 1

$

630,000

 

 

 

 

     Net purchases

 

1,900,000

 

 

 

 

     Inventory, December 31

 

(690,000

)

 

1,840,000

 

  







  Gross profit

 

 

 

$

620,000

 

  

 

 

 








  

 

Question 8

The following condensed information was reported by Peabody Toys, Inc., for 2013 and 2012:

  

($ in 000s)

  


  

2013

2012

  Income statement information

 

 

 

 

 

 

  Net sales

$

5,200

 

$

4,200

 

  Net income

 

180

 

 

124

 

  Balance sheet information

 

 

 

 

 

 

  Current assets

$

800

 

$

750

 

  Property, plant, and equipment (net)

 

1,100

 

 

950

 

  







       Total assets

$

1,900

 

$

1,700

 

  













  Current liabilities

$

600

 

$

450

 

  Long-term liabilities

 

750

 

 

750

 

  Paid-in capital

 

400

 

 

400

 

  Retained earnings

 

150

 

 

100

 

  







       Liabilities and shareholders’ equity

$

1,900

 

$

1,700