286 SECTION 1 The Role of Accounting as an Information System Required: Copy and complete the following table. Gross Profit (Loss) Recognized Revenue Recognized Over Time Revenue Recognized Upon Completion Situation 2016 2017 2018 2016 2017 2018 1 2 3 4 5 6 In 2016, Long Construction Corporation began construction work under a three-year contract. The contract price is $1,600,000. Long recognizes revenue over time according to percentage of completion for financial reporting purposes. The financial statement presentation relating to this contract at December 31, 2016, is as follows: Balance Sheet Accounts receivable (from construction progress billings) $30,000 Construction in progress $100,000 Less: Billings on construction contract (94,000) Cost and profit of uncompleted contracts in excess of billings 6,000 Income Statement Income (before tax) on the contract recognized in 2016 $20,000 Net sales $2,460,000 Less: Cost of goods sold: Inventory, January 1 $ 630,000 Net purchases 1,900,000 Inventory, December 31 (690,000) 1,840,000 Gross profit $ 620,000 E 5–22 Long-term contract; revenue recognition over time; solve for unknowns ● LO5–9 Required: 1. What was the cost of construction actually incurred in 2016? 2. How much cash was collected in 2016 on this contract? 3. What was the estimated cost to complete as of the end of 2016? 4. What was the estimated percentage of completion used to calculate revenue in 2016? (AICPA adapted) E 5–23 T he following is a portion of the condensed income statement for Rowan, Inc., a manufacturer of plastic containers: Inventory turnover; calculation and evaluation ● LO5–10 Required: 1. Determine Rowan’s inventory turnover. 2. What information does this ratio provide? E 5–24 Evaluating efficiency of asset management ● LO5–10 ($ in 000s) The 2016 income statement of Anderson Medical Supply Company reported net sales of $8 million, cost of goods sold of $4.8 million, and net income of $800,000. The following table shows the company’s comparative balance sheets for 2016 and 2015: 2016 2015 Assets Cash $ 300 $ 380 Accounts receivable 700 500 Inventory 900 700 Property, plant, and equipment (net) 2,400 2,120 Total assets $4,300 $3,700 Liabilities and Shareholders’ Equity Current liabilities $ 960 $ 830 Bonds payable 1,200 1,200 Paid-in capital 1,000 1,000 Retained earnings 1,140 670 Total liabilities and shareholders’ equity $4,300 $3,700
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