Long-term ContractsClorad 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$174,000Estimated costs to complete the contract426,000Partial billings to customers100,000Collections from customers25,000Total contract price1,000,000 (a) Total estimated costs for the contract$(b) Revenue to date$(c) Gross profit recognized$

Percentage of completion method shall be used to calculate the gross profit.

Answered: Long-term Contracts Clorad Corp.…

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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Buildit Corp. was contracted to construct a building for $2,440,000. The contract provided for progress payments. Buildit's accounting year ends 31 December. Work began under the contract on 1 March 20X3, and was completed on 30 November 20X5. Construction activities are summarized below by year: 20x3 20x4 20X5 Construction coats incurred during the year, $610,000; estimated costs to complete, $1,110,000; progress billings during the year, $520,000; and collections, $430,000. Construction costs incurred during the year, $980,000; estimated costs to complete, $350,000; progress billing during the year, $1,690,000; and collections, $1,430,000. Construction costs incurred during the year, $330,000. Because the contract was completed, the remaining balance was billed and later collected in full per the contract. Required: 1. Prepare Buildit's journal entries to record these events. Assume that percentage of completion is measured by the ratio of costs incurred to date divided by total…

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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	$