The board of directors of Oriole Construction Company is meeting to choose between the cost-recovery method andthe percentage-of-completion method of accounting for long-term contracts in the company's financial statements.You have been engaged to assist Oriole's controller in the preparation of a presentation to be given at the boardmeeting. The controller provides you with the following information:1. Oriole commenced doing business on January 1, 2024.2. Construction activities for the year ended December 31, 2024, were as follows:3.4.(a)ProjectABсDETotalContractPrice$494,000714,000472,000187,000444,000$2,311,000* Your answer is incorrect.BillingsThrough12/31/24$334,000204,000469,000(1) The cost-recovery method.94,000394,000$1,495,000Cash CollectionsThrough12/31/24$304,000204,000384,00062,000394,000$1,348,000Contract CostsIncurredThrough12/31/24Each contract is with a different customer.Any work remaining to be done on the contracts is expected to be completed in 2025.$418,000186,000344,000117,000314,000$1,379,000$(2) The percentage-of-completion method (based on estimated costs). $EstimatedAdditional CoststoCompleteContract$95,000Compute the amount of income (or loss) before selling, general, and administrative expenses for the year endedDecember 31, 2024, which would be reported under:434,00091,00078,500$698,50098000-0-167400 The board of directors of Oriole Construction Company is meeting to choose between the cost-recovery method andthe percentage-of-completion method of accounting for long-term contracts in the company's financial statements.You have been engaged to assist Oriole's controller in the preparation of a presentation to be given at the boardmeeting. The controller provides you with the following information:1. Oriole commenced doing business on January 1, 2024.2. Construction activities for the year ended December 31, 2024, were as follows:3.4.(a)ProjectABсDETotalContractPrice$494,000714,000472,000187,000444,000$2,311,000* Your answer is incorrect.BillingsThrough12/31/24$334,000204,000469,000(1) The cost-recovery method.94,000394,000$1,495,000Cash CollectionsThrough12/31/24$304,000204,000384,00062,000394,000$1,348,000Contract CostsIncurredThrough12/31/24Each contract is with a different customer.Any work remaining to be done on the contracts is expected to be completed in 2025.$418,000186,000344,000117,000314,000$1,379,000$(2) The percentage-of-completion method (based on estimated costs). $EstimatedAdditional CoststoCompleteContract$95,000Compute the amount of income (or loss) before selling, general, and administrative expenses for the year endedDecember 31, 2024, which would be reported under:434,00091,00078,500$698,50098000-0-167400

Cost-Recovery method:Using this strategy, no profit is realized until all contract expenses have…

Project A BUDE C Total Contract Price $494,000 714,000 472,000 187,000 444,000 $2,311,000 Billings Through 12/31/24 $334,000 204,000 469,000 94,000 394,000 $1,495,000 Cash Collections Through 12/31/24 $304,000 204,000 384,000 62,000 394,000 $1,348,000 Contract Costs Incurred Through 12/31/24 $418,000 186,000 344,000 117,000 314,000 $1,379,000 Estimated Additional Costs to Complete Contract $95,000 434,000 -0- 91,000 78,500 $698,500

Project A BUDE C Total Contract Price $494,000 714,000 472,000 187,000 444,000 $2,311,000 Billings Through 12/31/24 $334,000 204,000 469,000 94,000 394,000 $1,495,000 Cash Collections Through 12/31/24 $304,000 204,000 384,000 62,000 394,000 $1,348,000 Contract Costs Incurred Through 12/31/24 $418,000 186,000 344,000 117,000 314,000 $1,379,000 Estimated Additional Costs to Complete Contract $95,000 434,000 -0- 91,000 78,500 $698,500

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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