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Law Incorporation [45]
3 years ago
9

Barr Corp. started a long-term construction project in 20X0. The following data relate to this project: Contract price $4,200,00

0 Costs incurred in 20X0 $1,750,000 Estimated costs to complete $1,750,000 Progress billings $900,000 Collections on progress billings $800,000 The project is accounted for by the percentage of completion method of accounting. In Barr's 20X0 income statement, what amount of gross profit should be reported for this project?
Business
1 answer:
dalvyx [7]3 years ago
4 0

Answer:

The correct answer is $350,000

Explanation:

Contract price = $4,200,000

Costs incurred  = $1,750,000

Estimated costs to complete = $1,750,000

Progress billings= $900,000

Collections on progress billings= $800,000

<u>Contract price - total estimated cost</u>

<u />

$4,200,000 - ($1,750,000 + $1,750,000)

= $4,200,000 - $3,500,000

= $700,000

<u>one-half of the estimated costs of this construction project were incurred</u>

$1,750,000 ÷ ($1,750,000 + $1,750,000)

= $1,750,000 ÷ $3,500,000

= 0.5

In Barr's 20X0 income statement,what amount of gross profit should be reported for this project?

$700,000 x 0.5 = $350,000

$350,000 should be reported as gross profit for the 20X0 income statement.

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Answer:

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  • 2. Required by generally accepted accounting principles.
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  • 3. Treats fixed manufacturing cost as a period cost.
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Explanation:

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Suppose Simmons' common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2 percent.
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The WACC of the firm is 11.91%

Explanation:

The WACC or weighted average cost of capital is the rate of return that a business is expected to pay to all of its security holders- bonds, common stock, preferred stock- or is the cost of capital for the business.

To calculate the WACC, we use the following formula,

WACC = D/A * (1-tax rate) * rD  +  E/A * rE

Where,

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r = 0.034 + 1.37 * 0.082

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If for every $1 of equity, there is $0.45 of debt as given by debt-equity ratio.

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