Posted: May 2nd, 2016

Assume Pechstein uses the percentage of completion method??

The case study:
Often Board and other committee volunteers for nonprofit organizaations are compensated for expenses during travel and meetings. Some think that this attracts volunteers for the wrong reasons. Engage in a discussion regarding the pros and cons of compensating board members and whether this is common practice for non-profits.

The solution cites a reference supporting that compensation is not a common practice. The pros to offering paid expenses is to ensure Board members and volunteers are not personal “out” a vast amount of money in participating in the organization’s business needs. However, stringent policies must exist to outline what items will be paid for “upfront” or reimbursed, so that there is no abuse.

There is just one sheet. See the attached document for full details.

E24-3 (Segmented Reporting) LaGreca Company:

Revenue test
Operating Profit test
Identifiable assets test

On March 1, 2010, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2012. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2010, 2011, and 2012 are given below.

2010 2011 2012
Contract costs incurred during the year $2,880,000 $2,230,000 $2,190,000
Estimated costs to complete the contract at 12/31 $3,520,000 $2,190,000 $0
Billings to Fabrik during the year $3,200,000 $3,500,000 $1,700,000

1). Assume Pechstein uses the percentage of completion method. Provide the following amounts:

Revenues reported in 2010:
Expenses reported in 2011:
Gross Profit (Loss) reported in 2011:
Gross Profit (Loss) reported in 2012:

2). Assume Avengers uses the completed contract method. Provide the following amounts:

Revenues reported in 2010:
Expenses reported in 2011:
Gross Profit (Loss) reported in 2011:
Gross Profit (Loss) reported in 2012: