Rogers Ltd. has entered into a contract beginning in February 2020 to build two warehouses for ocean Ltd. The contract is a non-cancellable fixed price contract for $9.4 million. The following data pertain to the construction period. 2020 2021 2022Costs for the year $3,285,000 4,015,000 1,800,000Estimated costs to complete 4,015,000 1,825,000 -0-Progress billings for the year (non-refundable) 2,960,000 3,440,000 3,000,000Cash collected for the year 2,605,000 3,490,000 3,305,000 a) Using the percentage-of-completion method, calculate the percent complete for each year of the contract.b) Calculate the amount of the gross profit to be recognized each year of the contract.c) Prepare the journal entries for 2020 and 2021. (Use Materials, Cash, Payables for costs incurred to date.)d) What is the balance in the Contract Asset/Liability account at December 31, 2020 and 2021? Show how the construction contract would be reported on the SFP and the income statement for the year ended December 31, 2021

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Answered: Rogers Ltd. has entered into a contract…

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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Rogers Ltd. has entered into a contract beginning in February 2020 to build two warehouses for ocean Ltd. The contract is a non-cancellable fixed price contract for $9.4 million. The following data pertain to the construction period.

	2020	2021	2022
Costs for the year	$3,285,000	4,015,000	1,800,000
Estimated costs to complete	4,015,000	1,825,000	-0-
Progress billings for the year (non-refundable)	2,960,000	3,440,000	3,000,000
Cash collected for the year	2,605,000	3,490,000	3,305,000

a) Using the percentage-of-completion method, calculate the percent complete for each year of the contract.

b) Calculate the amount of the gross profit to be recognized each year of the contract.

c) Prepare the journal entries for 2020 and 2021. (Use Materials, Cash, Payables for costs incurred to date.)

d) What is the balance in the Contract Asset/Liability account at December 31, 2020 and 2021? Show how the construction contract would be reported on the SFP and the income statement for the year ended December 31, 2021

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