Reference no: EM133043317

Questions -

Q1. Olivia Company is constructing an office building under contract. The contract calls for progress billings and payments of $1,240,000 each quarter. The total contract price is $14,880,000 and the company estimates total costs of $14,200,000. The company estimates that the building will take 3 years to complete and construction commences on 2022. At December 31, 2023 Olivia Company estimates that it is 75% complete with their current construction project; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases.

a. How much is the difference, debit/(credit) between the construction in progress and the billings on construction in progress reported?

b. If the building was 30% completed by the end of 2022, how much is the total amount of expenses to be reported for 2023?

Q2. Ed Company sells a franchise for an initial fee of $1,400,000. A down payment of $400,000 is required, with the balance covered by a $1,000,000, 10% note payable in five equal annual installments. If all the material services have been performed and collectability of the notes is reasonably assured, but the refund period has not yet expired, what journal entry is needed to record the transaction?