Inexperienced construction company Martinez Corp. signed a risky non-cancellable contract to build a research facility at a fixed contract amount of $2,300,000. The work began in early 2020 and Martinez incurred costs of $1.035,000. At December 31, 2020, the estimated future costs to complete the project totalled $1,035,000. During 2021, Martinez ran into trouble with weather conditions and incurred the expected costs of $1,035,000 and estimated that it would need to spend an additional $355,000 to complete the project. During 2022, Martinez reluctantly completed the project, incurring further costs of $380,000. Calculate the amount of gross profit or loss that should be recognized each year under the percentage-of-completion method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round percent complete to 2 decimal places, e.g. 15.25.) Gross profit/(loss) $ December 31, 2020 Date December 31, 2021 December 31, 2021 Account Titles and Explanation $ Prepare the December 31, 2021 year-end journal entry to record costs, revenues, expenses, and losses from the contract. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round percent complete to 2 decimal places, e.g. 15.25.) December 31, 2022 $ Debit Credit 100
Inexperienced construction company Martinez Corp. signed a risky non-cancellable contract to build a research facility at a fixed contract amount of $2,300,000. The work began in early 2020 and Martinez incurred costs of $1.035,000. At December 31, 2020, the estimated future costs to complete the project totalled $1,035,000. During 2021, Martinez ran into trouble with weather conditions and incurred the expected costs of $1,035,000 and estimated that it would need to spend an additional $355,000 to complete the project. During 2022, Martinez reluctantly completed the project, incurring further costs of $380,000. Calculate the amount of gross profit or loss that should be recognized each year under the percentage-of-completion method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round percent complete to 2 decimal places, e.g. 15.25.) Gross profit/(loss) $ December 31, 2020 Date December 31, 2021 December 31, 2021 Account Titles and Explanation $ Prepare the December 31, 2021 year-end journal entry to record costs, revenues, expenses, and losses from the contract. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round percent complete to 2 decimal places, e.g. 15.25.) December 31, 2022 $ Debit Credit 100
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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am. 255.
Transcribed Image Text:### Case Study: Martinez Corp. Construction Contract
Inexperienced construction company, Martinez Corp., signed a high-risk, non-cancellable contract to build a research facility with a fixed contract amount of $2,300,000. The project commenced in early 2020, incurring costs of $1,035,000 by December 31, 2020. These costs were expected to complete the project.
However, in 2021, Martinez faced unforeseen weather conditions, incurring an additional $1,035,000 in costs, with an estimated $355,000 still needed for completion. The project was reluctantly completed in 2022, with further costs amounting to $380,000.
#### Gross Profit/Loss Calculation
Calculate the gross profit or loss for each year using the percentage-of-completion method. Ensure negative amounts are entered with a negative sign or in parentheses. Round all percentages to two decimal places (e.g., 15.25).
| Date | Gross Profit / (Loss) |
|--------------------|------------------------|
| December 31, 2020 | $ |
| December 31, 2021 | $ |
| December 31, 2022 | $ |
#### Journal Entry Preparation
Prepare the journal entries for December 31, 2021, to document costs, revenues, expenses, and losses related to the contract. Credit account titles will automatically indent when amounts are entered. If no entry is needed, select "No Entry" for account titles and enter "0" for amounts. Round percentages to two decimal places (e.g., 15.25).
| Date | Account Titles and Explanation | Debit | Credit |
|--------------------|-----------------------------------|--------|--------|
| December 31, 2021 | | | |
| | | | |
| | | | |
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