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121 the life of a construction contract is 4 years the firm used the percentage of c 4297519

 

121. The life of a construction contract is 4 years. The firm used the percentage-of-completion method. Under this method, cash collected and revenues recognized are shown below. Total cost of the project was $800,000. What portion of the total cost was incurred each year?
 

 

Cash

Revenue

Cost

Year

Collected

Recognized

Incurred

1

$   100,000

$   300,000

A

2

200,000

300,000

B

3

200,000

150,000

C

4

     500,000

     250,000

            D

Total

$1,000,000

$1,000,000

$800,000

 

 

 

 

 

 

122. Furmanov Company started business on January 1, Year 7. It recognizes revenue and expense at the time of sale for financial reporting and uses the installment method for income tax reporting. Under the installment method, the firm recognizes revenue when it receives cash, and matches expenses with revenues based on the average cost of goods sold to sales percentage for the year in which the firm made the sale. The income tax rate is 30%. Data for Year 7 and Year 8 as reported to shareholders, appear below:
 

 

Year 7

Year 8

Net sales on account

$2,400,000

$3,000,000

Cash collections of Year 7 sales

1,620,000

480,000

Cash collections of Year 8 sales

2,040,000

Cost of merchandise sold

1,440,000

1,920,000

All other (period) expenses

240,000

360,000

 

 

 

Required:
 

a.

Compute the amount of net income after taxes for financial reporting for Year 7 and Year 8.

b.

Compute the amount of taxable income for Year 7 and Year 8.

 

 

 

 

 

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