Journal Entries

Problem # 3:

The Bryan Construction Company received a contract to build a new
dormitory complex. The selling price of $30,000,000 will be paid when
the complex is completed. The costs to construct the complex are as
follows:

Year Cost

19X9 $4,000,000

20X0 9,000,000

20X1 8,000,000

$21,000,000

a. Assuming the contract is with a large state-supported school which is
very strong financially, how much revenue should The Bryan Construction
Company recognize in 19X9?

b. Assume, instead, that the contract is with a school whose financial
status is uncertain, and hence the probability of collection is
uncertain, how much revenue should Bryan recognize in 19X9?

Answer:

a.

b.

Problem # 4:

The Denton Company had the following balances at January 1, 20X0:

Accounts Receivable $250,000 Debit

Allowance for Uncollectible Accounts 16,000 Credit

The following activity occurred during 20X0:

1. Cash sales were $800,000

2. In addition, cash sales were made to special customers who were

given a 4% trade discount. The normal selling price (before the

discount) was $200,000.

3. Credit sales were $2,800,000

4. Collections on credit sales: cash collections were $2,608,000;

however, credit customers also took advantage of $42,000 worth of

cash discounts offered.

5. Sales returns and allowances on credit sales were $26,000. A full

credit was given by The Denton Company.

6. Write-offs of bad debts were $17,100.

7. Bad debt recoveries were $300.

8. The December 31, 20X0 estimation of bad debts is 7% of the ending

accounts receivable balance.

a. Prepare the appropriate journal entry for The Denton Company for each
of the transactions noted above.

Answer:

a. 1.

2.

3.

4.

5.

6.

7.

8.