In 2018, the Laguna Inc entered into a contract to construct a road for 5th Avenue for $14,000,000. The road was completed in 2018. Information related to the contract is as follows: Laguna uses the completed contract method of accounting for long-term construction contracts. Calculate the amount of gross profit to be recognized in each of the three years. Prepare all necessary journal entries for each of the years (credit various accounts for construction costs incurred). Prepare a partial balance sheet for 2016 and 2017 showing any items related to the contract. 201620172018Cost incurred during the year$3,360,000$5,040,000$3,080,000Estimated costs to complete as of year-end7,840,0002,800,000-0-Billings during the year2,800,0005,600,0005,600,000Cash collections during theyear2,520,0005,040,0006,440,000

SOLUTION- A BALANCE SHEET IS A FINANCIAL STATEMENT THAT PRESENTS A COMPANY,S ASSETS , LIABILITY AND…

Answered: In 2018, the Laguna Inc entered into a…

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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In 2018, the Laguna Inc entered into a contract to construct a road for 5^th Avenue for $14,000,000. The road was completed in 2018. Information related to the contract is as follows:

Laguna uses the completed contract method of accounting for long-term construction contracts.

Calculate the amount of gross profit to be recognized in each of the three years.
Prepare all necessary journal entries for each of the years (credit various accounts for construction costs incurred).
Prepare a partial balance sheet for 2016 and 2017 showing any items related to the contract.

2016
2017
2018
Cost incurred during the year
$3,360,000
$5,040,000
$3,080,000
Estimated costs to complete as of year-end
7,840,000
2,800,000
-0-
Billings during the year
2,800,000
5,600,000
5,600,000
Cash collections during the
year
2,520,000
5,040,000
6,440,000

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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