120 $7,665,000 3,285,000 10,050,000 1010 8,250,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 6
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On June 1, 2019, Al-Bader Construction Company contracted to construct a building for Nass Company, for a total contract price of $12,600,000. The project was to be
completed by October 31, 2021. The annual costs incurred, estimated costs to complete the contract, billings to Nass and collections for 2019, 2020, and 2021 are given
below.
2019
2020
2021
Costs incurred to date
$4,320,000
$7,665,000
$10,950,000
Estimated costs to complete
5,280,000
3,285,000
1-0-
Billings to date
4,800,000
10,050,000
12,600,000
Collections to date
3,000,000
8,250,000
9,750,000
Instructions:
If Al-Bader Company uses the percentage-of-completion method;
1. Compute the amount of gross profit or loss to be recognized each year.
2. Prepare all necessary journal entries for 2020.
3. Prepare the journal entry to record the completion of the contract in 2021.
4. Prepare partial statement of financial position at December 31, 2019.
5. If Al-Bader Company uses the cost-recovery method, prepare the necessary journal entry to recognize any gross profit in 2021.
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Question 6
19 points
Save Answe
On June 1, 2019, Al-Bader Construction Company contracted to construct a building for Nass Company, for a total contract price of $12,600,000. The project was to be
completed by October 31, 2021. The annual costs incurred, estimated costs to complete the contract, billings to Nass and collections for 2019, 2020, and 2021 are given
below.
2019
2020
2021
Costs incurred to date
$4,320,000
$7,665,000
$10,950,000
Estimated costs to complete
5,280,000
3,285,000
1-0-
Billings to date
4,800,000
10,050,000
12,600,000
Collections to date
3,000,000
8,250,000
9,750,000
Instructions:
If Al-Bader Company uses the percentage-of-completion method;
1. Compute the amount of gross profit or loss to be recognized each year.
2. Prepare all necessary journal entries for 2020.
3. Prepare the journal entry to record the completion of the contract in 2021.
4. Prepare partial statement of financial position at December 31, 2019.
5. If Al-Bader Company uses the cost-recovery method, prepare the necessary journal entry to recognize any gross profit in 2021.
For the toolbar, press ALT F10 (PC) or ALT-FN-F10 (Mac)
BIVS
Paragraph
M
Arial
10pt
+
A
EM
2 I XO
MacBook Air
***
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