Seasons Construction is constructing an office building under contract for CannonCompany and uses the percentage-of-completion method. The contract calls forprogress billings and payments of $5,000,000 each year. The total contract price is$15,000,000 and Seasons estimates total costs of $12,000,00O. Seasons estimatesthat the building will take 3 years to complete, and commences construction onJanuary 2, 2021.At December 31, 2021, Seasons estimates that it is 30% complete with theconstruction, based on costs incurred, which are consistent with the originalestimate.Prepare the journal entries required in 2021, if any, to record construction costs,revenues, and billings.

The percentage of completion method is a method of recognizing revenues for contracts that span over…

Answered: Prepare the journal entries required in…

Business

Accounting

Prepare the journal entries required in 2021, if any, to record construction costs, revenues, and billings.

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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Question

Seasons Construction is constructing an office building under contract for Cannon
Company and uses the percentage-of-completion method. The contract calls for
progress billings and payments of $5,000,000 each year. The total contract price is
$15,000,000 and Seasons estimates total costs of $12,000,00O. Seasons estimates
that the building will take 3 years to complete, and commences construction on
January 2, 2021.
At December 31, 2021, Seasons estimates that it is 30% complete with the
construction, based on costs incurred, which are consistent with the original
estimate.
Prepare the journal entries required in 2021, if any, to record construction costs,
revenues, and billings.

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