Reference no: EM131231026

Module Problem-Solution Assignment:

Problem 1

Red Sox Company has the following sales of land and cash collections:

In 2010, there was the sale of Bux Land for $3,000,000 that cost them $1,500,000. The purchase agreement required that payments be made of $1,200,000 when there are tenants on the land and the following payment of $1,200,000 was made in 2010.

In 2011, there was the sale of Spokane County land for $2,700,000 which cost Red Sox $1,800,000. The payments were required were $900,000 when development started on the land and then the final payments of $900,000 each in 2012 and 2013. Red Sox had cash collections of the $900,000 and a payment of $700,000 for Bux Land in 2011.

Additional Facts:

You will assume that Red Sox Company can estimate with ease the uncollectible accounts and then accrues the bad debts of 7% of sales and will recognize the revenue upon the transfer of title.

Requirements:

Prepare the journal entries to record the sales, cash collections and recognition of gross profit only if appropriate in the years 2010 and 2011.

Problem 2

Alpha Great Construction was the best selection to build the Stoddard Temple for the amount of $2,500,000. The project broke ground in 2010 and was then completed in 2011. Below the cost and other data are shown below:

Year	2010	2011
Costs incurred during the year	$555,000	1,200,000
Estimated sosts to complete	1,500,000	0
Billings during the year	450,000	1,500,000
Cash Collection during the year	350,000	1,400,000

Alpha Great Construction is using the percentage of completion method to recognize revenue:

Requirements:

Compute the amount of gross profit recognized in 2010 and 2011.