Chapter 6–Long-Term Construction Contracts Allbright Builders, Inc. is constructing a new business building for the local university. The contract price is $6,000,000 and estimated costs are $5,100,000. The project is expected to take three years. Allbright is able to reasonable estimate costs throughout the contract. Presented below is a summary of costs, billings, and collections for the three years. Year 1 $1,700,000 Year2 $1,600,000 Year3 Actual Costs per Year $2,000,000 Estimated Costs to $3,400,000 $1,900,000 so Complete Billings Collections $2,100,000 $1,900,000 $2,200,000 $2,000,000 $1,700,000 $2,100,000 a. Prepare the journal entries to record costs, billings and collections for Years 1, 2, and 3. b. Compute the gross profit for each year and record the journal entry to reflect revenues, expenses and gross profit. c. Prepare the balance sheet disclosures for Years 1 and 2. d. Assume that it is not possible to make reasonable estimates of progress during the contract. How would the journal entries for revenue and expense differ? How would the balance sheet disclosures differ?

Chapter 6–Long-Term Construction Contracts Allbright Builders, Inc. is constructing a new business building for the local university. The contract price is $6,000,000 and estimated costs are $5,100,000. The project is expected to take three years. Allbright is able to reasonable estimate costs throughout the contract. Presented below is a summary of costs, billings, and collections for the three years. Year 1 $1,700,000 Year2 $1,600,000 Year3 Actual Costs per Year $2,000,000 Estimated Costs to $3,400,000 $1,900,000 so Complete Billings Collections $2,100,000 $1,900,000 $2,200,000 $2,000,000 $1,700,000 $2,100,000 a. Prepare the journal entries to record costs, billings and collections for Years 1, 2, and 3. b. Compute the gross profit for each year and record the journal entry to reflect revenues, expenses and gross profit. c. Prepare the balance sheet disclosures for Years 1 and 2. d. Assume that it is not possible to make reasonable estimates of progress during the contract. How would the journal entries for revenue and expense differ? How would the balance sheet disclosures differ?

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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