117. Chambliss 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:
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.
118. A construction firm enters a long-term contract to build a bridge. The expected and actual cash receipts and disbursements for the project are as follows:
1
$1,000
$4,000
2
2,000
3
3,000
1,000
4
4,000
Required:What is the revenue during each of the following periods under each of the specified methods of revenue recognition?
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here