LAGUNA COLLEGE OF BUSINESS AND ARTS

ACCTG306 ADVANCED ACCOUNTING PART 1

ASSIGNMENT ANSWER KEY
PROBLEM 1 - FRANCHISE ACCOUNTING
DOWN PAYMENT
NOTE (PV)
TOTAL REVENUE
LESS: DIRECT-IFF
GROSS PROFIT
GROSS PROFIT - IFF
GROSS PROFIT - CFF
INTEREST INCOME
TOTAL INCOME
INDIRECT - IFF
DIRECT - CFF
INDIRECT - CFF
NET INCOME

1,050,000.00
3,724,000.00
4,774,000.00
(1,645,000.00)
3,129,000.00

PROBLEM 2 - LONGTERM CONSTRUCTION CONTRACT

CONSTRUCTION IN PROGRESS 2013
COST INCURRED
REALIZED GROSS PROFIT
GROSS PROFIT RATE

441,000.00
425,250.00
15,750.00
21%

REALIZED GROSS PROFIT

divided by: GROSS PROFIT RATE
ESTIMATED GROSS PROFIT

15,750.00
21%
75,000.00

CONTRACT PRICE
Less: ESTIMATED GROSS PROFIT
TOTAL ESTIMATED COST

2,100,000.00
(75,000.00)
2,025,000.00

TOTAL ESTIMATED COST

Less: Cost Incurred 2013
ESTIMATED COST TO COMPLETE 2013

CONSTRUCTION IN PROGRESS 2013

EXCESS OF PROGRESS BILLINGS OVER CIP
PROGRESS BILLINGS 2013

2,025,000.00
(425,250.00)
1,599,750.00

441,000.00
84,000.00
525,000.00

ADDITIONAL BILLINGS (55% * 2,100,000)

PROGRESS BILLINGS 2014
EXCESS OF PROGRESS BILLINGS OVER CIP
CONSTRUCTION IN PROGRESS 2014
CONSTRUCTION IN PROGRESS 2014
CONSTRUCTION IN PROGRESS 2013
COST INCURRED 2014
REALIZED GROSS LOSS 2014

1,155,000.00
1,680,000.00
(330,750.00)
1,349,250.00
1,349,250.00
(441,000.00)
(969,000.00)
(60,750.00)

PROBLEM 5 - INSTALLMENT SALES

FV OF TRADE-IN AFTER RECONDITION
LESS: RECONDITION COST
20% GROSS PROFIT (112,140 * 20%)
FV OF TRADE-IN PRIOR RECONDITION

112,140.00
(5,362.00)
(22,428.00)
84,350.00

ALLOWANCE FOR TRADE-IN

FV OF TRADE-IN PRIOR RECONDITION
OVER ALLOWANCE

89,600.00
(84,350.00)
5,250.00

INSTALLMENT SALES
OVER ALLOWANCE
ADJUSTED INSTALLMENT SALES
COST OF INSTALLMENT SALES
DEFERRED GROSS PROFIT
GROSS PROFIT RATE
INSTALLMENT SALES
LESS: ALLOWANCE FOR TRADE IN
INSTALLMENT - ACCOUNTS RECEIVABLE
LESS: COLLECTION IN CASH (6 MONTHS - SEE BELOW)
OUTSTANDING INSTALLMENT A/R
x COST RATE ( 1 - GP RATE)
DEFERRED GROSS PROFIT FOR REPOSSESSED
LESS: RECOVERY (FV OF REPOSSESSED)
LOSS (GAIN) ON REPOSSESSION
SALES OF REPOSSESSED
COST OF SALES
REALIZED GROSS PROFIT ON SALE OF REPOSSESSED

367,500.00
(5,250.00)
362,250.00
(289,800.00)
72,450.00
20%
367,500.00
(89,600.00)
277,900.00
(166,740.00)
111,160.00
80%
88,928.00
(65,625.00)
23,303.00
90,125.00
(72,100.00)
18,025.00

COLLECTION:
IN KIND (OLD POKEDEX)
CASH (MAY, JUN, JUL, AUG, SEP, OCT)
TOTAL COLLECTION
x GROSS PROFIT RATE
REALIZED GROSS PROFIT
LOSS ON REPOSSESSION
REALIZED GROSS PROFIT ON SALE OF REPOSSESSED
NET INCOME

84,350.00
166,740.00
251,090.00
20%
50,218.00
(23,303.00)
18,025.00
44,940.00

1,050,000.00
1,050,000.00
65.54%
688,170.00
332,500.00
74,480.00
1,095,150.00
(55,088.00)
(110,176.00)
(63,000.00)
866,886.00

*=
** =

**
***

***=

ID no.
ID no. * 2

Note that the Construction in Progress is composed of cost incurred and Realized gross p

441,000 / 2,100,000

OR USE TACCOUNT
APPROACH ON
THE RIGHT

as alternative, when there is a realized gross profit, CIP/Contr

is the same as Actual Cost Incurred to Date/Total Estimated C

12/31/2013

OR USE TACCOUNT
APPROACH ON
THE RIGHT

72,450 / 362,250

65,625 + 6,475

SQUEEZE
12/31/2014

6 * ((367,500 - 89,600) /10)

((5,950,000 - 1,050,000) / 4) * 3.04

6,650,000 * 5%
Continuing franchise fee

3,724,000 * 12% * 2/12

From July 1 to Aug 31 we only earned 2 months

On the assumption that the note payment is annually

however, those who assumed that the note payment
is monthly, it will be considered accordingly

st incurred and Realized gross profit/loss

a realized gross profit, CIP/Contract Price

urred to Date/Total Estimated Cost

CONSTRUCTION IN PROGRESS

441,000.00

---------------------------------->

84,000 LIAB

--------------------------

969,000.00
1,349,250.00

60,750.00
<----------------------------------

330,750 LIAB

<------------------------

PROGRESS BILLING

---------------------------------->

525,000.00 12/31/2013

<----------------------------------

1,155,000.00 55% OF CONTRACT PRICE

1,680,000.00 12/31/2014