Electric Boat, Inc., of New London, Connecticut, Quiz 3 help
Electric Boat, Inc., of New London, Connecticut, Quiz 3 help
Question 1 (12 points)
Electric Boat, Inc., of New London, Connecticut, began operation on the construction of a new deep sea discovery submarine for the US Navy. On January 2, 2016, and entered into a contract. This project was signed for the contract price was $6,000,000 and provided for penalties of $100,000 per week for late completion. Although during 2016 the project had been on schedule for timely completion, it was completed four weeks late on August 31, 2017.
The following data pertains to the separate long-term construction projects in progress:
|
As of December 31, 2016: |
|
|
Costs incurred to date |
$2,400,000 |
|
Estimated costs to complete |
600,000 |
|
Billings on 12/31/16 |
3,150,000 |
|
Cash collection on 12/31/16 |
2,550,000 |
|
As of August 31, 2017: |
|
|
Costs incurred to date |
3,000,000 |
|
Estimated costs to complete |
0 |
|
Billing on 8/31/17 |
2,450,000 |
|
Cash collection 8/31/17 |
3,050,000 |
Additional information
>> Electric Boat accounts for its long-term construction contracts using the percentage-of- completion method.
What amounts should Electric Boat’s gross profit (loss) be recognized for the years ended
December 31, 2016, and 2017, under the percentage-of-completion method.
Question 2 (28 points)
Electric Boat, Inc., of New London, Connecticut, began operation on the construction of a new deep sea discovery submarine for the US Navy. On January 2, 2016, and entered into a contract. This project was signed for the contract price was $6,000,000 and provided for penalties of $100,000 per week for late completion. Although during 2016 the project had been on schedule for timely completion, it was completed four weeks late on August 31, 2017.
The following data pertains to the separate long-term construction projects in progress:
|
As of December 31, 2016: |
|
|
Costs incurred to date |
$2,400,000 |
|
Estimated costs to complete |
600,000 |
|
Billings on 12/31/16 |
3,150,000 |
|
Cash collection on 12/31/16 |
2,550,000 |
|
As of August 31, 2017: |
|
|
Costs incurred to date |
3,000,000 |
|
Estimated costs to complete |
0 |
|
Billing on 8/31/17 |
2,450,000 |
|
Cash collection 8/31/17 |
3,050,000 |
Additional information
>> Electric Boat accounts for its long-term construction contracts using the percentage-of- completion method.
Using the information about the Electric Boat, prepare the following general journal entries without explanation:
> 12/31/16: Costs incurred for the year
> 12/31/16: Progressive Billings & Collections for the year
> 12/31/16: Revenue Recognition for the year
> 12/31/17: Costs incurred for the year
> 12/31/17: Progressive Billings & Collections for the year
> 12/31/17: Revenue Recognition for the year
> 12/31/17: Closing for the Long Term Contract accounts
Question 3 (5 points)
Goody Construction Company has consistently used the percentage-of-completion method of recognizing income. During year 1, Goody entered into a fixed-price contract to construct an office building for $10,000,000. Information relating to the contract is as follows:
|
December 31 |
||
|
Year 1 |
Year 2 |
|
|
Percentage of completion (% expenses to date) |
20% |
60% |
|
Estimated total cost at completion |
$7,000,000 |
$8,000,000 |
|
Income recognized (cumulative) |
600,000 |
1,200,000 |
Contract costs incurred during year 2 were:
Question 4 (5 points)
Goody Construction, Inc. has consistently used the percentage-of-completion method of recognizing income. During year 2, Goody started work on a $3,000,000 fixed-price construction contract. The accounting records disclosed the following data for the year ended December 31, year 2:
|
Costs incurred |
$930,000 |
|
Estimated cost to complete |
2,190,000 |
|
Progress billings |
1,100,000 |
|
Collections |
700,000 |
How much loss should Goody have recognized in year 2?
Question 5 (5 points)
Goody Co., which began operations on January 1, year 1, appropriately uses the installment method of accounting to record revenues. The following information is available for the years ended December 31, year 1 and year 2:
|
Year 1 |
Year 2 |
|
|
Sales |
$1,000,000 |
$2,000,000 |
|
Gross Profit realized on sales made in: |
||
|
Year 1 |
180,000 |
90,000 |
|
Year 2 |
200,000 |
|
|
Gross Profit Percentages |
30% |
40% |
What amount of installment accounts receivable should Goody report in its December 31, year 2 balance sheet?
Question 6 (5 points)
Each of Goody Cookie Co.’s twenty-one new franchisees contracted to pay an initial franchise fee of $30,000. By December 31, year 1, each franchisee had paid a nonrefundable $10,000 fee and signed a note to pay $10,000 principal plus the market rate of interest on December 31, year 2, and December 31, year 3. Experience indicates that two franchisee will default on the additional payments. Services for the initial fee will be performed in year 2. What amount of net unearned franchise fees would Badger report at December 31, year 1?
Question 7 (5 points)
On January 2, year 1, Good Co. granted Bad Guy, its president, compensatory stock options to buy 1,000 shares of Good’s $10 par common stock. The options call for a price of $20 per share and are exercisable for three years following the grant date. Bad Guy exercised the options on December 31, year 1. The market price of the stock was $50 on January 2, year 1, and $70 on December 31, year 1. The fair value of a similar stock option with the same terms was $29 on the grant date. What is compensation expense for year 1 for the share-based payments?
Question 8 (5 points)
On January 2, year 1, Good Co. granted Bad Guy, its president, compensatory stock options to buy 1,000 shares of Good’s $10 par common stock. The options call for a price of $20 per share and are exercisable for three years following the grant date. Bad Guy exercised the options on December 31, year 1. The market price of the stock was $50 on January 2, year 1, and $70 on December 31, year 1. The fair value of a similar stock option with the same terms was $28 on the grant date. By what net amount should Paid in Capital Common Stock increase as a result of the grant and exercise of the options?
Question 9 (5 points)
Goody Corporation (a nonpublic company) established an employee stock option plan on January 1, year 1. The plan allows its employees to acquire 20,000 shares of its $5 par value common stock at $70 per share, when the market price is $75. The options may not be exercised until five years from the grant date. The risk-free interest rate is 6%, and the stock is expected to pay dividends of $3 annually. The fair value of a similar option at the grant date is $6.50. What is the amount of deferred compensation expense that should be recorded in year one?
Question 10 (5 points)
Goody Co. had the following capital structure during year 1 and year 2:
|
Preferred stock, $10 par, 4% cumulative, 25,000 shares issued & outstanding |
$250,000 |
|
Common stock, $5 par, 200,000 shares issued & outstanding |
1,000,000 |
Goody reported net income of $500,000 for the year ended December 31, year 2. Goody paid no preferred dividends during year 1 and paid $16,000 in preferred dividends during year 2. What amount of dividends is attributable to year 2?
Question 11 (5 points)
Goody, Inc. had the following common stock balances and transactions during year 1
|
Date |
Transaction/Balance |
Shares |
|
1/1/y1 |
Common stock outstanding |
30,000 |
|
2/1/y1 |
Issued a 10% common stock dividend |
3,000 |
|
4/1/y1 |
Issued common stock for cash |
8,000 |
|
12/31/y1 |
Common stock outstanding |
41,000 |
What were Goody’s year 1 weighted-average shares outstanding?
Question 12 (5 points)
Goody, Inc. had 300,000 shares of common stock issued and outstanding at December 31, year 1. On July 1, year 2, an additional 50,000 shares of common stock were issued for cash. Goody also had unexercised stock options to purchase 40,000 shares of common stock at $16 per share outstanding at the beginning and end of year 2. The average market price of Goody’s common stock was $20 during year 2. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31 year 2?
Question 13 (5 points)
Goody Co.’s adjusted trial balance at December 31, year 1, includes the following account balances:
|
Common stock, $3 par |
$600,000 |
|
Additional paid-in capital |
800,000 |
|
Treasury stock, at cost |
25,000 |
|
Net unrealized loss on available-for-sale securities |
20,000 |
|
Retained earnings: appropriated for uninsured earthquake loss |
150,000 |
|
Retained earnings: un-appropriated |
200,000 |
What amount should Goody report as total stockholders’ equity in its December 31, year 1 balance sheet?
Question 14 (5 points)
Goody Corp. had 700,000 shares of common stock authorized and 300,000 shares outstanding at December 31, year 1. The following events occurred during year 2:
|
January 31 |
Declared 10% stock dividend |
|
June 30 |
Purchased 100,000 shares |
|
August 1 |
Reissued 50,000 shares |
|
November 30 |
Declared 3-for-1 stock split |
At December 31, year 2, how many shares of common stock did Goody have outstanding?
