Reference no: EM133030407
Question 1 - SP Inc. sells a variety of satellite TV packages. The popular $600 Basic Package includes a hardware component (consisting of a satellite dish and receiver) along with a 12-month subscription to TV channels. Spectra Inc. sells the hardware components without a subscription for $180 and sells the 12-month subscription to the same TV channels without hardware for $540 per year. Let's account for the sale of one Basic Package for $600 on January 1, 2020.
Required - Prepare the journal entries for 2020.
Question 2 - Delight Company constructs office buildings in Indiana. It began a $50,000,000, 3-year contract on January 1, 2018. The following information is available regarding this contract.
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2018
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2019
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2020
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Costs incurred during current year
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$12,000,000
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$20,000,000
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$13,000,000
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Estimated costs to complete at year end
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28,000,000
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10,000,000
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0
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Progress billings during year
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10,000,000
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18,000,000
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22,000,000
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Collections on billings during year
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8,000,000
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17,000,000
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25,000,000
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Required -
a. Assuming Delight uses the percentage-of-completion method, calculate the gross profit to be recognized in 2018 and 2019.
b. Assuming Delight uses the percentage-of-completion method, indicate how the contract would be presented on Winter's income statement for the year ended December 31, 2019.
c. Assuming Delight uses the completed-contract method, calculate the gross profit to be recognized in 2020.
d. Assuming Delight uses the completed-contract method, indicate how the contract would be presented on Delight's balance sheet (Accounts Receivable and Construction-in-process) for the year ended December 31, 2019.
e. Assuming Delight uses the completed-contract method and billings in 2019 are $40,000,000 instead of $18,000,000, what will be the effect on the balance sheet in 2019?