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Forman Company has contracted to build a dam over a period of 4 years for $3,000,000. Information relating to the performance of the contract

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Forman Company has contracted to build a dam over a period of 4 years for $3,000,000. Information relating to the performance of the contract is summarized as follows:

Required:

If an amount is zero, enter “0”.

1. a. Compute the profit or loss for each year of the contract under the percentage-of-completion method. Enter losses as a negative number.    Forman Company   Profit / Loss   2013 – 2016   2013   2014   2015   2016   Gross profit (loss) $    $    $    $     
b. Compute the profit or loss for each year of the contract under the completed-contract method. Enter losses as a negative number.    Forman Company   Profit / Loss   2013 – 2016   2013   2014   2015   2016   Gross profit (loss) $    $    $    $     
2. a. Prepare the relevant sections of the income statement for each year under the percentage-of-completion method.    Forman Company   Income Statement (partial)   For the years ended 2013-2016   2013   2014   2015   2016   Construction revenue $    $    $    $     Construction expense                  Gross profit (loss)  $    $    $    $     
Prepare the relevant sections of the ending balance sheet for 2013 under the percentage-of-completion method.    Forman Company   Balance Sheet (partial)   December 31, 2013   Current Assets   Accounts receivable  $     Inventory   Construction in progress  $     Less: Partial billings       Costs and recognized profit not yet billed       
Prepare the relevant sections of the ending balance sheet for 2014 under the percentage-of-completion method.    Forman Company   Balance Sheet (partial)   December 31, 2014   Current Assets   Accounts receivable  $     Inventory   Construction in progress  $     Less: Partial billings       Costs and recognized profit not yet billed       
Prepare the relevant sections of the ending balance sheet for 2015 under the percentage-of-completion method.    Forman Company   Balance Sheet (partial)   December 31, 2015   Current Assets   Accounts receivable  $     Inventory   Construction in progress  $     Less: Partial billings       Costs not yet billed       Current Liabilities   Provision for loss on contract  $     
b. Prepare the relevant sections of the income statement for each year under the completed-contract method. Enter losses as a negative number.    Forman Company   Income Statement (partial)   For the years ended 2013-2016   2013   2014   2015   2016   Gross profit (loss) $    $    $    $     
Prepare the relevant sections of the ending balance sheet for 2013 under the completed-contract method.    Forman Company   Ending Balance Sheet (partial)   December 31, 2013   Current Assets   Accounts receivable  $     Inventory   Construction in progress  $     Less: Partial billings       Excess of costs over related billings       
Prepare the relevant sections of the ending balance sheet for 2014 under the completed-contract method.    Forman Company   Ending Balance Sheet (partial)   December 31, 2014   Current Assets   Accounts receivable  $     Inventory   Construction in progress  $     Less: Partial billings       Excess of costs over related billings       
Prepare the relevant sections of the ending balance sheet for 2015 under the completed-contract method.    Forman Company   Ending Balance Sheet (partial)   December 31, 2015   Current Assets:   Accounts receivable  $     Current Liabilities:   Partial billings  $     Less: Construction in progress       Provision for loss on contract       Excess of billings and provision for loss over  $     
 
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ACC 620: Financial Reporting II is a continuation of ACC 610. In ACC 620, your focus in the final project will be on developing skills in critical thinking and applying accounting theories and practices according to generally accepted accounting principles (GAAP).

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By continuing to use the company that you adopted in ACC 610, you will apply the technical competence and other skills required by today’s CPAs. Through casestudy analysis, you will develop skills such as communication, presentation, and interpersonal relations in conjunction with technical accounting knowledge. If you have transferred directly into ACC 620 and have not had the opportunity to choose a company, you will do so at this time. You will also use this company in ACC 630. Throughout ACC 620 and ACC 630, you will apply the concepts you are learning using the financial data and business scenarios of a prominent retail company. You may choose from Wal-Mart, Target, Sears, Kroger, or Amazon.

ACC 620: Financial Reporting II is a continuation of ACC 610. In ACC 620, your focus in the final project will be on developing skills in critical thinking and applying accounting theories and practices according to generally accepted accounting principles (GAAP). You will be analyzing situations and communicating results to decision makers with an emphasis on stockholders’ equity, income measurement, income taxes, pensions, leases, and statements of changes in financial positions.

Complete critical elements I and II of the final project.

I. Stockholders’ Equity A. Determine how your company got its initial financial start in terms of debt (liabilities) or equity (capital). Support your response. B. Analyze the equity section of your company’s balance sheet as compared to your company’s industry average. Rate the company’s performance against its competitors. C. Review your company’s dividend policy and its history. Based on the information, discuss the trends over the past year.

II. Income Measurement/Revenue Recognition A. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) came together on a unified project to outline the accounting principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS. Research IAS-18

 
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Income Taxes A. If Congress voted to eliminate corporate taxes, what would be the effect on your company’s income statement and balance sheet? Defend your response. B. Calculate the income tax rate for your chosen company. What effect will an increase in income of $2,000,000 have on your company?

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Prompt: In the first milestone, you addressed stockholders’ equity and income measurement/revenue recognition for your portfolio. In the second milestone for your final project, you will continue work on your portfolio by completing critical elements III and V. You will be addressing income taxes and pensions.

III. Income Taxes A. If Congress voted to eliminate corporate taxes, what would be the effect on your company’s income statement and balance sheet? Defend your response.

B. Calculate the income tax rate for your chosen company. What effect will an increase in income of $2,000,000 have on your company?

C. What are the effects on the balance sheet and income statement? Justify your response.

D. How much did your company pay in foreign taxes last year? What percentage of its income is United States vs. foreign?

V. Pensions Address the following elements in the form of a memo to your CEO:

A. From your company’s financial information, what type of pension plan does it have? Discuss the reasons why your company has chosen this particular plan.

B. What was the effect of the pension plan on your company’s financial statements? Defend your response.

C. Your CEO has informed you—the controller of your company—that the board of directors has made the decision to look at other options of types of retirement plans. Investigate what other alternatives would be available, and determine which would be appropriate for your particular company.

 
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COMMUNICATION CASE 1 Heidi Birmingham and James T. Roberts have decided to create a business. They have financing available and have a well-developed

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Heidi Birmingham and James T. Roberts have decided to create a business. They have financing available and have a well-developed business plan. However, they have not yet decided which type of legal business structure would be best for them.

Required Write a report for these two individuals outlining the types of situations in which the corporate form of legal structure would be the best choice.

COMMUNICATION CASE 2

Use the information in Communication Case 1.

Required Write a report for these two individuals outlining the types of situations in which the partnership form of legal structure would be the best choice.

 
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