On January 1, 20x6, Bad, a real estate company, entered into a contract to construct a subdivision on a piece of land it has acquired and, when construction is complete, to deliver he finished houses to their customers. The following data pertains to the said contract each customer is to sign. Each house costs $4,000,000 each (a total of 10 houses are to be constructed). Construction will take 2 years to complete. Payment terms are 50% by the end of the 1st year, 25% at the end of the 2nd year and the balance will be paid after 3 months rom the final turn-over. The client can transfer the contract to another, should they not feel satisfied with the house on or before the house is 50% complete. The company incurred the following expenses for 20x6. Total cost of land - $2,000,000; Estimated total cost of construction - $25,000,000, (including the costs for the common areas, streets and light posts amounting to $5,000,000); Estimated total cost of contract for the 10 houses - $40,000,000; n CY 20x6, total construction cost incurred amount to $13,000,000 with all common areas already fully constructed, while fair value of the land is now worth $3,500,000. The contract s considered to be a multiple contract. How much is included as current asset in the financial statements of Bad related to the above information?
On January 1, 20x6, Bad, a real estate company, entered into a contract to construct a subdivision on a piece of land it has acquired and, when construction is complete, to deliver he finished houses to their customers. The following data pertains to the said contract each customer is to sign. Each house costs $4,000,000 each (a total of 10 houses are to be constructed). Construction will take 2 years to complete. Payment terms are 50% by the end of the 1st year, 25% at the end of the 2nd year and the balance will be paid after 3 months rom the final turn-over. The client can transfer the contract to another, should they not feel satisfied with the house on or before the house is 50% complete. The company incurred the following expenses for 20x6. Total cost of land - $2,000,000; Estimated total cost of construction - $25,000,000, (including the costs for the common areas, streets and light posts amounting to $5,000,000); Estimated total cost of contract for the 10 houses - $40,000,000; n CY 20x6, total construction cost incurred amount to $13,000,000 with all common areas already fully constructed, while fair value of the land is now worth $3,500,000. The contract s considered to be a multiple contract. How much is included as current asset in the financial statements of Bad related to the above information?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 20x6, Bad, a real estate company, entered into a contract to construct a
subdivision on a piece of land it has acquired and, when construction is complete, to deliver
the finished houses to their customers. The following data pertains to the said contract each
customer is to sign. Each house costs $4,000,000 each (a total of 10 houses are to be
constructed). Construction will take 2 years to complete. Payment terms are 50% by the end
of the 1st year, 25% at the end of the 2nd year and the balance will be paid after 3 months
from the final turn-over. The client can transfer the contract to another, should they not feel
satisfied with the house on or before the house is 50% complete.
The company incurred the following expenses for 20x6.
Total cost of land - $2,000,000;
Estimated total cost of construction - $25,000,000, (including the costs for the common areas,
streets and light posts amounting to $5,000,000);
Estimated total cost of contract for the 10 houses - $40,000,000;
In CY 20x6, total construction cost incurred amount to $13,000,000 with all common areas
already fully constructed, while fair value of the land is now worth $3,500,000. The contract
is considered to be a multiple contract.
How much is included as current asset in the financial statements of Bad related to the
above information?
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