Hardhat Construction Company has a contract to construct a €4,500,000 bridge at an estimated cost of €4,556,250. The contract is to start in July 2019, and the bridge isto be completed in October 2021. The following data pertain to the construction period.201920202021Cost to date$ 1,000,000$ 2,916,000$ 4,556,250Estimated cost to complete3,000,000$ 1,640,250Progress billing during the year900,0002,400,0001,200,000Cash collected during the year750,0001,750,0002,000,000REQUIRED:a) Using percentage-of-completion method, prepare schedules to compute the profit and loss to be recognized as a result of this contract for the year ended October 31,2019, 2020 and 2021.b) Using cost recovery method, prepare schedules to compute the profit and loss to be recognized as a result of this contract for the year ended October 31, 2019, 2020and 2021.

The amount earned from the business operation is known as operating income, but when the expenses to…

a) Using percentage-of-completion method, prepare schedules to compute the profit and loss to be recognized as a result of this contract for the year ended October 31, 2019, 2020 and 2021. b) Using cost recovery method, prepare schedules to compute the profit and loss to be recognized as a result of this contract for the year ended October 31, 2019, 2020 and 2021.

a) Using percentage-of-completion method, prepare schedules to compute the profit and loss to be recognized as a result of this contract for the year ended October 31, 2019, 2020 and 2021. b) Using cost recovery method, prepare schedules to compute the profit and loss to be recognized as a result of this contract for the year ended October 31, 2019, 2020 and 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Hardhat Construction Company has a contract to construct a €4,500,000 bridge at an estimated cost of €4,556,250. The contract is to start in July 2019, and the bridge is
to be completed in October 2021. The following data pertain to the construction period.
2019
2020
2021
Cost to date
$ 1,000,000
$ 2,916,000
$ 4,556,250
Estimated cost to complete
3,000,000
$ 1,640,250
Progress billing during the year
900,000
2,400,000
1,200,000
Cash collected during the year
750,000
1,750,000
2,000,000
REQUIRED:
a) Using percentage-of-completion method, prepare schedules to compute the profit and loss to be recognized as a result of this contract for the year ended October 31,
2019, 2020 and 2021.
b) Using cost recovery method, prepare schedules to compute the profit and loss to be recognized as a result of this contract for the year ended October 31, 2019, 2020
and 2021.

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