A company enters into a four year service contract at a contracted price of $12,000,000 on December 31, 20x0. At that time it was estimated that the total contract costs would amount to $10,000,000.
Data relating to the contract over its four years are as follows:
20x1 20x2 20x3 20x4
Costs incurred during year $1,800,000 $2,400,000 $4,425,000 $2,600,000
Expected costs to complete contract 8,200,000 6,300,000 2,875,000 -0-
For each the four years, Evaluate the amount of revenues and profit/loss that will be realized.
Write the journal entries for each of the subsequent transactions:
June 2 Sold 200 unit of product A605 to Chancellor Industries for $30 each. Terms 1/10, n40
June 4 Chancellor Industries returned 35 units. The units were restocked.
June 11 Received a cheque from Chancellor for payment of the June 2 sale.
June 14 Sold 500 units of product A505 to Newman Industries for $75 each. Terms 1/10, n40.
June 18 Newman Industries informs us that some of the items sold on June 14 are damaged. They will keep the items but are requesting a credit note. After inspecting the units, a credit note of $5,000 is issued.
July 27 A cheque is received from Newman Industries.
Simmons Company engaged in the following transactions in July.
July 1 Sold merchandise to Bernice Wilson on credit, terms 2/10, n/30, FOB shipping point, $2,100 (cost, $1,260).
July 3 Purchased merchandise on credit from Simic Company, terms n/30, FOB shipping point, $3,800.
July 4 Accepted for full credit a return from Bernice Wilson and returned merchandise to inventory, $200 (cost, $120).
July 5 Paid Banner Freight for freight charges on merchandise received, $290.
July 6 Purchased merchandise on credit from Hayes Supply Company, terms n/20, $636.
July 8 Purchased merchandise on credit from Salinas Company, terms n/30, FOB shipping point, $3,600, which includes $200 freight costs paid by Salinas Company.
July 9 Received payment from Bernice Wilson (July 1 purchase)
July 12 Returned some of the merchandise received on July 3 for credit, $600.
July 16 Received a $100 credit memo for the July 6 purchase for minor defects.
The merchandise was not returned.
July 17 Sold merchandise for cash, $1,000 (cost, $600).
July 24 Paid Simic Company for purchase of July 3.
1. Prepare general journal entries to record the transactions, assuming use of the periodic inventory system.
2. Prepare general journal entries to record the transactions, assuming use of the perpetual inventory system.