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Kailey Construction accepted a three-year, $1,000,000 fixed fee contract to renovate a parking deck. Kailey uses the percentage of completion method and the cost-to-cost method of measuring progress. Information related to the construction contract follows: 2022 2023 2024 Actual construction costs incurred during the year $ 350,000 $525,000 $ 50,000 Construction costs incurred in prior years 0 350,000 875,000 Cumulative construction costs incurred to date 350,000 875,000 925,000 Estimated costs to complete 450,000 25,000 0 Estimated total costs 800,000 900,000 925,000 Progress billings made during the year 500,000 300,000 200,000 Cash collections during the year 400,000 350,000 250,000 Required: a. Calculate the percentage of completion, revenues and gross profits recognized for each year. b. Prepare the journal entries required for each year to record the contract. Show all supporting computations. c. Prepare partial balance sheet for 2022 and 2023.

Kailey Construction accepted a three-year, $1,000,000 fixed fee contract to renovate a parking deck. Kailey uses the percentage of completion method and the cost-to-cost method of measuring progress. Information related to the construction contract follows: 2022 2023 2024 Actual construction costs incurred during the year $ 350,000 $525,000 $ 50,000 Construction costs incurred in prior years 0 350,000 875,000 Cumulative construction costs incurred to date 350,000 875,000 925,000 Estimated costs to complete 450,000 25,000 0 Estimated total costs 800,000 900,000 925,000 Progress billings made during the year 500,000 300,000 200,000 Cash collections during the year 400,000 350,000 250,000 Required: a. Calculate the percentage of completion, revenues and gross profits recognized for each year. b. Prepare the journal entries required for each year to record the contract. Show all supporting computations. c. Prepare partial balance sheet for 2022 and 2023.

FINANCIAL ACCOUNTING
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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Kailey Construction accepted a three-year, $1,000,000 fixed fee contract to renovate a parking deck. Kailey uses the percentage of completion method and the cost-to-cost method of measuring progress. Information related to the construction contract follows: 2022 2023 2024 Actual construction costs incurred during the year $ 350,000 $525,000 $ 50,000 Construction costs incurred in prior years 0 350,000 875,000 Cumulative construction costs incurred to date 350,000 875,000 925,000 Estimated costs to complete 450,000 25,000 0 Estimated total costs 800,000 900,000 925,000 Progress billings made during the year 500,000 300,000 200,000 Cash collections during the year 400,000 350,000 250,000 Required: a. Calculate the percentage of completion, revenues and gross profits recognized for each year. b. Prepare the journal entries required for each year to record the contract. Show all supporting computations. c. Prepare partial balance sheet for 2022 and 2023.
Transcribed Image Text:Kailey Construction accepted a three-year, $1,000,000 fixed fee contract to renovate a parking deck. Kailey uses the percentage of completion method and the cost-to-cost method of measuring progress. Information related to the construction contract follows: 2022 2023 2024 Actual construction costs incurred during the year $ 350,000 $525,000 $ 50,000 Construction costs incurred in prior years 0 350,000 875,000 Cumulative construction costs incurred to date 350,000 875,000 925,000 Estimated costs to complete 450,000 25,000 0 Estimated total costs 800,000 900,000 925,000 Progress billings made during the year 500,000 300,000 200,000 Cash collections during the year 400,000 350,000 250,000 Required: a. Calculate the percentage of completion, revenues and gross profits recognized for each year. b. Prepare the journal entries required for each year to record the contract. Show all supporting computations. c. Prepare partial balance sheet for 2022 and 2023.
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