Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 18: Question BE18-23 (page 1034)

Guillen, Inc. began work on a \(7,000,000 contract in 2017 to construct an office building. Guillen uses the completed-contract method. At December 31, 2017, the balances in certain accounts were Construction in Process \)1,715,000, Accounts Receivable \(240,000, and Billings on Construction in Process \)1,000,000. Indicate how these accounts would be reported in Guillen’s December 31, 2017, balance sheet.

Short Answer

Expert verified

Costs in excess of billings is $715,000

Step by step solution

01

Meaning of Balance Sheet

Balance sheet is one of the three fundamentalfinancial statements used to analyze a corporation. It shows the financial position of the company as of the publishing date. It shows the assets, liabilities, and funds of shareholders of the company.

02

Balance Sheet December 31, 2017, of Guillen Inc.

Current Assets:

Amount ($)

Total Amount ($)

Accounts Receivables

240,000

240,000

Inventories

Construction in Process

1,715,000

Less: Billings

(1,000,000)

Costs in excess of billings

715,000

715,000

Total:

955,000

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

When is revenue recognized in the following situations? (a) Revenue from selling products, (b) revenue from services performed, (c) revenue from permitting others to use company assets, and (d) revenue from disposing of assets other than products.

Identify the five steps in the revenue recognition process.

When does a company satisfy a performance obligation? Identify the indicators of satisfaction of a performance obligation.

(Allocate Transaction Price) Crankshaft Company manufactures equipment. Crankshaft’s products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from \(200,000 to \)1,500,000 and are quoted inclusive of installation. The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications. Crankshaft has the following arrangement with Winkerbean Inc.

• Winkerbean purchases equipment from Crankshaft for a price of \(1,000,000 and contracts with Crankshaft to install the equipment. Crankshaft charges the same price for the equipment irrespective of whether it does the installation or not. Using market data, Crankshaft determines installation service is estimated to have a standalone selling price of \)50,000. The cost of the equipment is \(600,000.

• Winkerbean is obligated to pay Crankshaft the \)1,000,000 upon the delivery and installation of the equipment.

Crankshaft delivers the equipment on June 1, 2017, and completes the installation of the equipment on September 30, 2017. The equipment has a useful life of 10 years. Assume that the equipment and the installation are two distinct performance obligations which should be accounted for separately.

Instructions

(a) How should the transaction price of $1,000,000 be allocated among the service obligations?

(b) Prepare the journal entries for Crankshaft for this revenue arrangement on June 1, 2017 and September 30, 2017, assuming Crankshaft receives payment when installation is completed.

What qualitative and quantitative disclosures are required related to revenue recognition?
See all solutions

Recommended explanations on Business Studies Textbooks

Intermediate Accounting

Read Explanation

Managerial Economics

Read Explanation

Strategic Analysis

Read Explanation

Change Management

Read Explanation

Human Resources

Read Explanation

Introduction to Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free