Citation Builders, Incorporated, builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10-20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale. During 2024, Citation began construction of an office building for Altamont Corporation. The total contract price is $16 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: Costs incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2024 $ 3,200,000 9,600,000 1,600,000 1,440,000 2025 $ 7,600,000 3,600,000 8,000,000 6,560,000 2026 $ 3,600,000 Required: 1. Which method is most equivalent to recognizing revenue at the point of delivery? 6,400,000 8,000,000 Also during 2024, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $740,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2024 and paid for in full for $740,000 each by the buyers. The completed homes cost $555,000 each to construct. The construction costs incurred during 2024 for the nine uncompleted homes totaled $3,330,000.
Citation Builders, Incorporated, builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10-20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale. During 2024, Citation began construction of an office building for Altamont Corporation. The total contract price is $16 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: Costs incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2024 $ 3,200,000 9,600,000 1,600,000 1,440,000 2025 $ 7,600,000 3,600,000 8,000,000 6,560,000 2026 $ 3,600,000 Required: 1. Which method is most equivalent to recognizing revenue at the point of delivery? 6,400,000 8,000,000 Also during 2024, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $740,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2024 and paid for in full for $740,000 each by the buyers. The completed homes cost $555,000 each to construct. The construction costs incurred during 2024 for the nine uncompleted homes totaled $3,330,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Citation Builders, Incorporated, builds office buildings and single-family homes. The office buildings are constructed under contract
with reputable buyers. The homes are constructed in developments ranging from 10-20 homes and are typically sold during
construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the
remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the
down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price
reductions are used to promote the sale.
During 2024, Citation began construction of an office building for Altamont Corporation. The total contract price is $16 million. Costs
incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows:
Costs incurred during the year
Estimated costs to complete as of year-end
Billings during the year
Cash collections during the year
2024
$ 3,200,000
9,600,000
1,600,000
1,440,000
2025
$ 7,600,000
3,600,000
8,000,000
6,560,000
2026
$ 3,600,000
Required:
1. Which method is most equivalent to recognizing revenue at the point of delivery?
6,400,000
8,000,000
Also during 2024, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for
$740,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were
completed during 2024 and paid for in full for $740,000 each by the buyers. The completed homes cost $555,000 each to construct.
The construction costs incurred during 2024 for the nine uncompleted homes totaled $3,330,000.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education