Prepare schedules to calculate the amount of gross profit to be recognized for the year ended December 31, 2020, and the amount to be shown as contract assets or liabilities at December 31, 2020, under the completed-contract method. (Do not leav any answer field blank. Enter O for amounts. Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45)) Grass

Prepare schedules to calculate the amount of gross profit to be recognized for the year ended December 31, 2020, and the amount to be shown as contract assets or liabilities at December 31, 2020, under the completed-contract method. (Do not leav any answer field blank. Enter O for amounts. Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45)) Grass

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Carla Vista Construction Company began operations on January 1, 2020. During the year, Carla Vista entered into a non-cancellable
contract with Martinez Corp. to construct a manufacturing facility. At that time, Carla Vista estimated that it would take five years to
complete the facility at a total cost of $4,505,000. The total contract price for construction of the facility is $6,003,000. During the
year, Carla Vista incurred $1,075,000 in construction costs related to the project. The estimated cost to complete the contract is
$4,300,000. Martinez Corp. was billed and paid 27% of the contract price. The billings are non-refundable.
Prepare schedules to calculate the amount of gross profit to be recognized for the year ended December 31, 2020, and the
amount to be shown as contract assets or liabilities at December 31, 2020, under the completed-contract method. (Do not leave
any answer field blank. Enter O for amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or
parentheses e.g. (45).)
Gross profit to be recognized for the year ended December 31, 2020
Carla Vista Construction Company
Computation of Contract Liability
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Prepare schedules to calculate the amount of gross profit to be recognized for the year ended December 31, 2020, and the
amount to be shown as contract assets or liabilities at December 31, 2020, under the percentage-of-completion method. (Enter
negative amounts using either a negative sign preceding the number eg.-45 or parentheses e.g. (45))
Carla Vista Construction Company
Computation of Gross Profit and Contract Liability
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