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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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.
- 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
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F982f9c78-1f8d-4cb7-aa72-d612102b086a%2F13fd43a6-6451-4d28-85ee-0f5cf16cb16f%2F8jsuzr_processed.png&w=3840&q=75)
Transcribed Image Text: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
![We solve this question step by step
Step-1
year
Total
2022
2023
2024
Note No: 2
The % completion-contract method
A
cost incurred
during the
year
200,000
300,000
150,000
650,000
Note.01
Cost of
complete to
date-PY B+A
200,000
500,000
650,000
column A
column B=
column C
columnD
column=
column F
column G =
US-GAAP
Contract duration is 3 years
Total estimated contract revenue is
Total estimated contract costis
D=B+C
Estimated cost to Estimated
Complete
E=ED F=reveunexEG
compliti revenue
Total cost on during year Revenue
400,000 600,000
300,000 800,000 63%
650,000 100%
33%
$800.000
$550.000
266,667 266,667
233,333 500,000
300,000 800,000
800,000
hformation given Question
Cument year cost incurred during the year + last year cost of complete to date
Information given Question
Cost of complete to date + Estimated cost to complete
D=E+C
(Cost of Complete to date d Estimated total cost ) x 100 E=(BC) x 100
Total revenue x%
Cument year Revenue during the year + last year Revenue of complete to date
H-F-A
Financial Statement
Statement of Income extract - 31 December 2022
Fevenue
COS(B)
Gross proft (2)
Mement of Income extract 31 December 2023
Gross
profit
266,666.67
200.000.00
66.666.67
Fevenue
COS (8)
66,667
Gross prof (2)
(66,667) stement of Income extract - 31 December 2024
150,000
150,000
Net Profit: F a prolkis expected under the contract, revenue and costs (and hence profik) are to be recognized in the
Net Loss: Fanetloss is expected under the contract, the entire lossis ropognized immediately in the income statement. Revenue and
contract costs are recognized in the income statement on the basis of Stage of Completion of the contract
Revenue
COS (9)
Gross profit (2)
233,303.33
-06.086.67
300,000.00
150.000.00
150.000.00
Column H- Revenue during year-Cost incurred during the](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F982f9c78-1f8d-4cb7-aa72-d612102b086a%2F13fd43a6-6451-4d28-85ee-0f5cf16cb16f%2Fp23f1lr_processed.png&w=3840&q=75)
Transcribed Image Text:We solve this question step by step
Step-1
year
Total
2022
2023
2024
Note No: 2
The % completion-contract method
A
cost incurred
during the
year
200,000
300,000
150,000
650,000
Note.01
Cost of
complete to
date-PY B+A
200,000
500,000
650,000
column A
column B=
column C
columnD
column=
column F
column G =
US-GAAP
Contract duration is 3 years
Total estimated contract revenue is
Total estimated contract costis
D=B+C
Estimated cost to Estimated
Complete
E=ED F=reveunexEG
compliti revenue
Total cost on during year Revenue
400,000 600,000
300,000 800,000 63%
650,000 100%
33%
$800.000
$550.000
266,667 266,667
233,333 500,000
300,000 800,000
800,000
hformation given Question
Cument year cost incurred during the year + last year cost of complete to date
Information given Question
Cost of complete to date + Estimated cost to complete
D=E+C
(Cost of Complete to date d Estimated total cost ) x 100 E=(BC) x 100
Total revenue x%
Cument year Revenue during the year + last year Revenue of complete to date
H-F-A
Financial Statement
Statement of Income extract - 31 December 2022
Fevenue
COS(B)
Gross proft (2)
Mement of Income extract 31 December 2023
Gross
profit
266,666.67
200.000.00
66.666.67
Fevenue
COS (8)
66,667
Gross prof (2)
(66,667) stement of Income extract - 31 December 2024
150,000
150,000
Net Profit: F a prolkis expected under the contract, revenue and costs (and hence profik) are to be recognized in the
Net Loss: Fanetloss is expected under the contract, the entire lossis ropognized immediately in the income statement. Revenue and
contract costs are recognized in the income statement on the basis of Stage of Completion of the contract
Revenue
COS (9)
Gross profit (2)
233,303.33
-06.086.67
300,000.00
150.000.00
150.000.00
Column H- Revenue during year-Cost incurred during the
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