Contract price of $2,400,000. Estimated. Information relating to the costs and billings for this contract is as follows: 2019 2020 2021 Costs incurred during the year 700,000 1,100,000 750,000 Estimated costs to complete 1,300,000 800,000 Instructions 1- Using the percentage-of-completion method, compute the gross profit or loss to be recognized each year. 2- Using the cost recovery method, compute the gross profit or loss to be recognized each year

Contract price of $2,400,000. Estimated. Information relating to the costs and billings for this contract is as follows: 2019 2020 2021 Costs incurred during the year 700,000 1,100,000 750,000 Estimated costs to complete 1,300,000 800,000 Instructions 1- Using the percentage-of-completion method, compute the gross profit or loss to be recognized each year. 2- Using the cost recovery method, compute the gross profit or loss to be recognized each year

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Ivanhoe Enterprises Ltd. has entered into a contract beginning in February 2023 to build two…

A: The percentage of completion method indicates the method through which the company determines the…

Q: (Long-Term Contract with Interim Loss) On March 1, 2017, Pechstein Construction Company contracted…

A: Prepare schedules to compute the profit or loss to be recognized as a result of this contract for…

Q: On February 20, 2022, ABC Construction Company entered into a fixed-price contract to construct a…

A: Calculation of total Amount of Contract Costs charged to Profit and Loss in 2022::: Total Estimated…

Q: Eagle Limited has a three-year contract; at the 31 December 2020 the outcome of the contract cannot…

A: To the Directors of Eagle Limited Subject: Accounting Treatment of Long-Term Contract under IFRS 15…

Q: Prepare a partial balance sheet to show how the information related to this contract would be…

A: As per percentage of completion method, revenue and gross profit are recognized over time as per the…

Q: Concord Corp. contracted to construct a building for $729000. Construction began in 2023 and was…

A: Some people and companies are doing the business of construction such as building, flats, roads,…

Q: On February 1, 2023, Sunland Contractors agreed to construct a building at a contract price of…

A: TO ASCERTAIN THE CURRENT YEAR'S PROFIT IT IS NECESSARY TO RECOGNIZE THE COST AS WELL AS REVENUE ON…

Q: Entity 2 entered contracts with two separate customers on 1 January 2022. The following information…

A: Please note that this answer assumes that there are no other relevant factors or adjustments…

Q: Question:- Provide Correct Answer

A: To compute: Gross profit = Contract Price - (Costs incurred in 2014 + Estimated costs to complete)…

Q: In 2024, the Westgate Construction Company entered into a contract to construct a road for Santa…

A: The percentage of completion method is used to recognize the revenue and profit or loss based on the…

Q: Assume Avaya contracted to provide a customer with Internet infrastructure for $2,050,000. The…

A: As per the honor code of Bartleby we are bound to give the answer of first three sub parts only,…

Q: a. Rattan commenced a contract to build an asset for a customer in the year ended 30 September 20X4.…

A: The cost of each contract is computed individually and a different account is opened for each…

Q: Rice Corp. recognizes revenue over time to account for long-term contracts and has the following…

A: The revenue under contract costs is recognized on the basis of degree of completion. Degree of…

Q: Exercise 6-24 (Algo) Long-term contract; revenue recognition over time; solve for unknowns [LO6-9]…

A: calculation of above requirement are as follows

Q: Exercise 6-19 (Algo) Long-term contract; revenue recognition over time and at a point in time…

A: The revenue and expenses of a construction contract may be recorded under the percentage of…

Q: Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8,…

A: A construction contract is a long-term contract because the construction work generally takes more…

Q: Required: 3. Complete the information required below to prepare a partial balance sheet for 2024 and…

Q: Hamilton Construction Company uses the percentage-of-completion method of accounting. In 2014, 2014…

A: When revenue is earned and realized, or realizable, it is recognized. Accordingly, revenue should be…

Q: Computing Income Statement Effect of Revenue Recognition on Long-Term Construction Contract On…

A: Income from the selling of products or services should be documented by a business. Recognizing…

Q: Computing Revenue and Gross Profit on Long-term Construction Contract Supplier Corp. enters into a…

A: According to IFRS 15, Revenue should be recognized on the basis of Completion Method. In completion…

Q: Gary Construction Associates accepted a contract to build an office building on January 2, 2022. The…

A: Contract costing is used to recognize the revenue and expenses of a long term contract. There are…

Q: In a construction contract assigned to a contractor, according to the table shown below. The…

A: The construction contract pricing comprises the cost of the direct project including field…

Q: Which of the following should be shown on the statement of financial position at December 31, 2023…

A: It is a method used for accounting for construction contracts. In this approach, revenue is…

Q: 4SMC entered into a long-term construction contract for 3 years. Contract price agreed was…

A: When the outcome of a construction contract can be estimated reliably, contract revenue and contract…

Q: Prepare a schedule showing the profit to be recognized each year. Prepare all journal entries…

Q: On January 1, 2020, BuilderOne Inc. enters into a contract with a customer to redesign and update an…

A: As the company recognizes the revenue appropriately at a point in time, the percentage of completion…

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

100%

Contract price of $2,400,000. Estimated. Information relating to the costs
and billings for this contract is as follows:
2019
2020
2021
Costs incurred during the year
700,000
1,100,000
750,000
Estimated costs to complete
1,300,000
800,000
Instructions
1- Using the percentage-of-completion method, compute the gross
profit or loss to be recognized each year.
2- Using the cost recovery method, compute the gross profit or loss to
be recognized each year

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!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2 Part 1

VIEW

Step 3 part 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

Computing Revenue and Gross Profit on Long-term Construction Contract Supplier Corp. enters into a government contract during the year to provide computer equipment for $1,800,000. The contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $1,260,000. The equipment is highly specialized and has no alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract cancellation. Actual costs incurred during the first year of the contract were $576,000 including unexpected cost overruns of $72,000 due to labor inefficiencies. Assume that at the end of the second year of the contract, the estimate of total costs has increased to $1,350,000 million due to an increase in cost of materials. Actual costs incurred to date are $1,012,500, excluding year one inefficiencies. a. Calculate…
Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2023. Information related to the contract is as follows: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Costs incurred during the year Estimated costs to complete as of year-end Revenue Gross profit (loss) $ $ Problem 6-10 (Algo) Part 5 5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar…
Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2023. Information related to the contract is as follows: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Costs incurred during the year Estimated costs to complete as of year-end Revenue Gross profit (loss) 2021 $2,044,000 5,256,000 2,170,000 1,885,000 2021 2022 Problem 6-10 (Algo) Part 4 4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and…
ABC Construction Company began operations in 2020. Construction activity for the first year is shown below. All contracts are with different customers and any work remaining at December 31, 2020 is expected to be completed in 2021. Project Contract Price Billings Collections Actual Costs Additional cost to complete 1 5,600,000 3,600,000 3,400,000 4,500,000 1,125,000 2 6,700,000 2,200,000 2,100,000 1,260,000 5,040,000 3 5,200,000 5,200,000 4,935,125 3,800,000 0 The company uses the percentage of completion method in accounting for its projects. A. The amount of construction cost recognized for Project 1 at the 2020 year – end is? B. The amount of accounts receivable reported by ABC in the year- end balance sheet is? C. The amount of inventory reported for the projects in the year- end balance sheet is?
4 In accounting for construction contracts using the percentage of completion method, the gross profit recognized during the year would be the estimated gross profit multiplied by the percentage of the costs incurred to date to the : Group of answer choices Total estimated cost Total contract price Total cost incurred to date Unbilled portion of the contract price
Please help me
Problem 6-11 (Algo) Long-term contract; revenue recognition upon completion [LO6-9] In 2024, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2026. Information related to the contract is as follows: Cost incurred during the year Estimated costs to complete as of year- end Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Assume that Westgate Construction's contract with Santa Clara County does not qualify for revenue recognition over time. Cost incurred during the year Estimated costs to complete as of year- end Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2024 (credit "Cash, Materials, etc." for construction costs incurred). 2-b. In the journal below, complete the…
send me the correct solution please
S Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] In 2024, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2026. Information related to the contract is as follows: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Problem 6-10 (Algo) Part 3 Balance Sheet (Partial) Current assets: 2024 2025 $ 2,523,000 $ 3,177,000 6,177,000 1,800,000 2,070,000 3,630,000 1,835,000 3,400,000 Current liabilities: 3. Complete the information required below to prepare a partial balance sheet for 2024 and 2025 showing any items related t contract. Note: Do not round intermediate calculations. 2024 2026 $ 1,980,000 2025 0 4,300,000…
Computing Revenue and Gross Proﬁt on Long-Term Construction Contract Supplier Corp. enters into a government contract during the year to provide computer equipment for $4,400,000. The contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $3,080,000 . The equipment is highly specialized and has no alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract cancellation. Actual costs incurred during the year were $1,408,000 including unexpected cost overruns of $176,000 due to labor inefficiencies.a. Would revenue be recognized over time or at a point in time for this contract?Answer b. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded during the year. 1. Recognized revenue Answer 2. Gross profit Answer…
Long-term Contracts Clorad Corp. contracts with a customer to construct a building. It appropriately determines that it has one performance obligation which is satisfied over time. Using the following information for Year 1, compute Clorad's (a) total estimated costs for the contract, (b) revenue to date, and (c) gross profit recognized. Year 1 (of 4-year project): Construction costs incurred during the year $174,000 Estimated costs to complete the contract 426,000 Partial billings to customers 100,000 Collections from customers 25,000 Total contract price 1,000,000 (a) Total estimated costs for the contract $ (b) Revenue to date $ (c) Gross profit recognized $
please help with calculation