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ACCTG 305 Chapter 2 Homework

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Accounting 305

Chapter 2 Homework


  1. 1.     Rupp Corp. provides services to customers exclusively on account.  At 12/31/2013 Rupp‘s balance sheet reported accounts receivable (net) of $.9 million – accounts receivable had a balance of $1.0 million and the balance in allowance for uncollectible accounts (AFUA) was $.1 million.  During 2014 Rupp billed customers $3 million for services provided (all on account), collected $2.8 million from customers for payment on account, and wrote-off $.08 million of customers’ accounts as uncollectible.  Required:

a)    Determine the balances in accounts receivable and AFUA at 12/31/2014 before adjustment,

b)    Determine 2014 uncollectible accounts expense and the after adjustment balance in AFuA assuming Rupp applies the “income statement method” and estimates bad debt expense at 5% of 2014 credit sales,

c)    Determine 2014 bad debt expense and the after adjustment balance in AFUA assuming Rupp applies the “balance sheet method” and estimates that  that $.18 million of year-end 2014 accounts receivable will be uncollectible.


  1. 2.     Victor Corp. sells inventory (a bulldozer) to Petril Co. for $120,000 on 6/01/13 with twelve monthly payments of $10,000 each to be received from Petril at the beginning of each month June 2013 – May 2014.  Victor previously acquired the bulldozer at a cost of $90,000.  Required: determine the amount of gross profit recognized by Victor in 2013 and 2014 assuming all payments are received on time and Victor applies:

a)    The general revenue (recognition) principle,

b)     The “installment method,”

c)    The “cost recovery first method.”



  1. 3.     Barron construction Corp. enters into a long-term contract to build an office building for Carrillo Corp. at a fixed contract price of $110 million on 5/12/2012.  Construction of the building is completed on 11/30/2014 at a total cost of $ 100 million.  Actual costs incurred during each year were as follows: $18 million in 2012, $39 million in 2013, and $43 million in 2014.  The total estimated cost to complete construction was $72 million at 12/31/2012 and $38 million at 12/31/2013.  Required: Determine the amount of gross profit to be recognized in 2012, 2013, and 2014 assuming Barron applies:

a)    The completed contract method, and

b)    The percentage of completion method.

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