Balance Sheet and Held-for-trading Investments

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293 – ASSIGNMENT #3

Question 1 Problem P7-6
Question 2
Free Form Builders Inc., a construction company, recognizes revenue from its long-term contracts using the percentage of completion method. On March 29, 2010, the company signed a contract to construct a building for $500,000. The company estimated that it would take four years to complete the contract and estimated the cost to the company at $325,000. The expected (estimated) costs in each of the four years are as follows: Year

Cost
2010
$110,750
2011
$100,500
2012
$ 84,250
2013
$ 29,500
Total

$325,000

On December 31, 2011, the company revised its estimates for the costs in 2012 and 2013. It estimated that it would cost $200,000 in 2012 and $100,000 in 2013 to complete the contract. Required:
Compute the revenue, expense, and gross profit for each of the four years. Assume that actual costs incurred were the same as expected/estimated/revised costs.
Question 3
The following information relates to the held-for-trading investments (“HFTI”) of Anders Corp.

Security

Acquisition
Date

Acquisition
Cost

Alpha
Beta
Delta
Omega

Apr. 13, 2010 $ 70,000
Aug. 24, 2010
45,000
Jan. 8, 2011
35,000
Jan. 3, 2012
95,000

Date
Sold
NA
May 27, 2011
NA
June 30, 2012

Selling
Price
NA
52,000
NA
98,000

Market Value Dec. 31
2010
2011
2012
$68,000
48,000
NA
NA

$72,000
NA
38,000
NA

$69,000
NA
41,000
NA

The Anders Corp. closes its books on December 31 each year.
[“NA” means not applicable.]
Required:
a. Prepare journal entries relating to these held-for-trading investments for each year. (There are NO brokerage fees.)
b. Show how the information regarding held-for-trading investments would be presented on the income statement and balance sheet for each year.

THE TEMPLATE FOR SUBMITTING YOUR ASSIGNMENT STARTS ON THE
NEXT PAGE.
ONLY HAND-IN THE PAGES STARTING WITH “NAME”.

293−ASSIGNMENT #3 NAME(Last,First): ________________________ STUDENT NO: _______________________
P7-6
Req. 1

Req. 2
Entry to record write-off of accounts receivable:

Entry to record bad debt expense for 2012:
Show your work in the space below the journal entry.

Req. 3
Vital Inc.
Partial Statement of Financial Position
As at December 31, 2012
Current Assets
….

Balance of ADA =

Req. 4

Question 2
Percentage of completion method
Year
2010

Calculations

Revenue

2011

2012

2013

TOTALS

Expense

Profit

Question 3
Debit

Credit

2010
April 13

August 24

December
31

2011
January 8

May 27

December
31

2012
January 3

June 30

December
31

b) Income Statement:
2010

2011

2012

2010

2011

2012

Realized gain (loss) on sale of HFTI
Unrealized gain (loss) from change in
market value of HFTI
Balance Sheet:
Held-for-Trading investments (“HFTI”)
(at ____________________________________________)

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