Izza Zahratunnisa

Intermediate Accounting II

19/438318/EK/22150 IUP 2021

Assignment — Chapter 18

Exercise 18-27:

(a) To record sales revenue, warranties, and related cost of goods sold:

October 1 2019

Cash/Accounts receivables 3,600

Sales revenue 3,200

Unearned warranty revenue 400

Cost of goods sold 1,440

Inventory 1,440

To record warranty expense on October 25 2019:

Warranty expense 200

Cash, parts, labour 200

(b) Celic company takes notice of the warranty expenses associated with the assurance-
type warranty when actual warranty costs are received during the 90 day period after the
customer receives the repaired computer. The company recognises the unearned service
revenue associated with the service-type warranty and revenue (during the extended
warranty period) and takes notice of the costs associated with providing the service-type
warranty as the money is received.

Exercise 18-33:

(a) gross profit recognised in:

2019 2020 2021

Contract $1,600,000 $1,600,000 $1,600,000

price

Costs:

Costs to date $400,000 $825,000 $1,070,000

Estimated 600,000 1,000,000 275,000 1,100,000 0 1,070,000

costs to
complete

Total 600,000 500,000 530,000

estimated
profit
Izza Zahratunnisa
Intermediate Accounting II

19/438318/EK/22150 IUP 2021

2019 2020 2021

Percentage 40% 75% 100%

completed to
date

Total gross 240,000 375,000 530,000

profit
recognised

Less: gross 0 240,000 375,000

profit
recognised in
previous
years

Gross profit $240,000 $135,000 $155,000

recognised in
current year

(b) 2020:

Construction in process 425,000

Materials, cash, payables 425,000

Accounts receivable 600,000

Billings on construction in 600,000

process

Cash 540,000

Accounts receivable 540,000

Construction expenses 425,000

Construction in process 135,000

Revenue from long-term 560,000

contracts

(c)

gross profit recognised in:

2019 2020 2021

Gross profit $0 $0 $30,000