Nance Network Consultants, Incorporated uses the percentage-of-completion method to account for its long-term contracts. It uses the cost-to-cost approach to measure progress. During the current year, Nance signed a contract to develop a computer network for an international accounting firm. Information related to the contract follows. DELIVERABLES Compute the percentage-of-completion for each year.Compute the gross profit and revenue to be recognized each year of the contract.Prepare the journal entries required for each year of the contract.Prepare the t-accounts for construction in progress, billings on construction in progress, and accounts receivable.Determine the net asset (liability) for each year of the contract on December 31.Contract Price 800,000 Contract priceActual construction costs incurred during the yearConstruction costs incurred in prior yearsCumulative construction costs incurred to dateEstimated costs to completeEstimated total costsProgress billings made during the yearCash collections during the year$800,0002022$ 200,0000200,000400,000600,000300,000220,00020232024$300,000 $150,000200,000 500,000500,000650,000300,0000800,000650,000400,000100,000380,000200,000

In the 'completed contract method' of revenue recognition, all the revenue and profit of contract…

Answered: Nance Network Consultants, Incorporated…

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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Nance Network Consultants, Incorporated uses the percentage-of-completion method to account for its long-term contracts. It uses the cost-to-cost approach to measure progress. During the current year, Nance signed a contract to develop a computer network for an international accounting firm. Information related to the contract follows.

DELIVERABLES

Compute the percentage-of-completion for each year.
Compute the gross profit and revenue to be recognized each year of the contract.
Prepare the journal entries required for each year of the contract.
Prepare the t-accounts for construction in progress, billings on construction in progress, and accounts receivable.
Determine the net asset (liability) for each year of the contract on December 31.
Contract Price 800,000

Contract price
Actual construction costs incurred during the year
Construction costs incurred in prior years
Cumulative construction costs incurred to date
Estimated costs to complete
Estimated total costs
Progress billings made during the year
Cash collections during the year
$800,000
2022
$ 200,000
0
200,000
400,000
600,000
300,000
220,000
2023
2024
$300,000 $150,000
200,000 500,000
500,000
650,000
300,000
0
800,000
650,000
400,000
100,000
380,000
200,000

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