Salmania Co. began working on a project on August 2019, to construct a BD8,250,000 bridge that is expected to be completed in October 2020, at an estimated cost of BD6,000,000. At the end of 2019, the costs to date were BD2,400,000 and the estimated total costs to complete had not changed. The progress billings during 2019 were BD1,600,000 and the cash

Salmania Co. began working on a project on August 2019, to construct a BD8,250,000 bridge that is expected to be completed in October 2020, at an estimated cost of BD6,000,000. At the end of 2019, the costs to date were BD2,400,000 and the estimated total costs to complete had not changed. The progress billings during 2019 were BD1,600,000 and the cash

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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Sanders Construction Company enters into a contract to build a new football stadium for Central Illinois University on November 5, 2021. The contract is for $20 million and work is expected to be completed by August 1, 2022. Orange will receive a $2 million bonus if the work is completed by July 1, 2022. Total payment will be made upon completion of the stadium. Orange has built numerous stadiums and believes that there is a 80% chance that it will complete the project by July 1, 2022. What is the transaction price? Question 27 options: a) $20,000,000 b) $20,400,000 c) $21,600,000 d) $22 ,000,000
On August 1, 2021, Reliable Software began developing a software program to allow individuals to customize their investment portfolios. Technological feasibility was established on January 31, 2022, and the program was available for release on March 31, 2022. Development costs were incurred as follows: August 1 through December 31, 2021 $ 6,400,000 January 1 through January 31, 2022 1,210,000 February 1 through March 31, 2022 1,610,000 Reliable expects a useful life of five years for the software and total revenues of $8,100,000 during that time. During 2022, revenue of $2,106,000 was recognized. Required:Prepare the journal entries to record the development costs in 2021 and 2022.
Blossom Construction Company has entered into a contract beginning January 1, 2025, to build a parking complex. It has been estimated that the complex will cost $606,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $896,000. The following data pertain to the construction period. Costs to date. Estimated costs to complete Progress billings to date Cash collected to date (a) Your answer is correct. 2026 $266,640 $412,080 339.360 193,920 Gross profit recognized in 2025 2025 Gross profit recognized in 2026 Gross profit recognized in 2027 270,000 240,000 Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period. (If answer is 0, please enter O. Do not leave any fields blank.) $ $ $ 2027 $617,000 545,000 896,000 495.000 896,000 127600 -0- 69600 81800 SU
Ivanhoe 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 $900000 each quarter. The total contract price is $17898000 and Ivanhoe estimates total costs of $18100000. Ivanhoe estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2021, Ivanhoe estimates that it is 30% complete with the construction, based on costs incurred.At December 31, 2022, YellowStone Construction estimates that it is 70% complete with the building; however, the estimate of total costs to be incurred has risen to $18300000 due to unanticipated price increases. What is the total amount of Construction Expenses that Ivanhoe will recognize for the year ended December 31, 2022? $7440600 $7380000 $7300600 $12810000
LMAO Company uses percentage of completion method in accounting for its long-term contracts. During 2019, it started work on a P10,000,000 project. At that time, LMAO estimated that it would take 3-4 years to complete the project. In 2019, the outcome of the project cannot be estimated reliably but in 2020, LMAO was already certain the project is estimated to cost P8,000,000. As of December 31, 2019, costs incurred amounts to P3,175,000. This amount includes P200,000 costs of materials stored in the warehouse intended for the next stage of construction the following year. The engineers' estimate of construction costs at completion is P8,500,000. LMAO billed the client 30% of the contract price and collected the same amount. In 2020, LMAO incurred P3,575,000 more and billed the customer P3,300,000. At the end of the year, the estimated cost to complete is still P2,250,000. How much is the Gross Income in 2020?*
Assume that Beta Inc. entered into an agreement to build a ship for $1,000 million and a reliable estimate of the project's total cost is $800 million. Project costs incurred by beta Inc. are as follows Project Costs Year 2014 2015 2016 Total Cost incurred $400 million $300 million $100 million $800 million Determine Beta's net income from this project for each year using percentage-of- completion and completed contract methods. Also, show the yearly revenues and expenses
During 2020. PC Software Inc. developed a new personal computer database management software package. To- tal expenditures on the project were $3,000,000, of which 40% occurred after the technological feasibility of the product had been established. The product was completed and offered for sale on January 1, 2021. During 2021, revenues from sales of the product totaled $4,800,000. The package is expected to be successfully marketable for five years, and the total revenues over the life of the product are estimated to be $20,000,000. Required a. Prepare the journal entries to account for the development of this product in 2020. b. Prepare the journal entries to record the amortization of capitalized computer software development costs in 2021. c. What disclosures are required in the December 31, 2021, financial statements regarding computer software costs? d. Suppose this product were developed for internal use. How would your answers to (a), (b), and (c) change?
ABC Construction Company began operations in 2020. Construction activity for the first year is shown below. All contracts are with different customers and any work remaining at December 31, 2020 is expected to be completed in 2021. Project Contract Price Billings Collections Actual Costs Additional cost to complete 1 5,600,000 3,600,000 3,400,000 4,500,000 1,125,000 2 6,700,000 2,200,000 2,100,000 1,260,000 5,040,000 3 5,200,000 5,200,000 4,935,125 3,800,000 0 The company uses the percentage of completion method in accounting for its projects. A. The amount of current asset/ liability reported for the projects in the year-end balance sheet is? B. The net profit or loss reported by ABC in its income statement for 2020 is?
Build a Bridge Inc. prepares its financial statements in accordance with IFRS. The company started work on a contract in May 2023 to build a small bridge at a fixed price of $10,000,000. The bridge was to be completed by September 2025 at a total estimated cost of $8,000,000. Total cumulative costs incurred by the end of December 2023 and 2024 were $2,000,000 and $5,500,000, respectively. Because of cost overruns in 2024, it is now expected that the project will cost $800,000 more than originally estimated. Final costs at the end of the project totalled $9,000,000. Required Determine the amount of gross profit to be recognized for the years ending December 31, 2023 and 2024. First calculate the percent complete on December 31, 2023. The percent complete on December 31, 2023 is %.
Indiana Co. began a construction project in 2018 with a contract price of $162 million to be received when the project is completed in 2020. During 2018, Indiana incurred $33 million of costs and estimates an additional $85 million of costs to complete the project. Indiana recognizes revenue over time and for this project recognizes revenue over time according to the percentage of the project that has been completed. Suppose that, in 2019, Indiana incurred additional costs of $64 million and estimated an additional $51 million in costs to complete the project. Indiana (Do not round your percentage calculated): Multiple Choice Recognized $3.00 million loss on the project in 2019. Recognized $6.13 million gross profit on the project in 2019. Recognized $3.13 million loss on the project in 2019. Recognized $3.13 million gross profit on the project in 2019.
On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for MR Inc for a price of $20 million. During 2018, costs of $4 million were incurred with estimated costs of $12 million yet to be incurred. In 2019, costs incurred were $8 million with remaining costs estimated to be $5 million. The project was completed in 2020 after additional costs of $5.5 million were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage-of-completion, and the bridge under construction is deemed to be under the control of MR Inc throughout the construction period. Compute the amount of revenue and gross profit or loss to be recognized by Arrow in 2018, 2019, and 2020.
On January 1, 2021, the company obtained a $3 million loan with a 10% interest rate. The building was completed on September 30, 2022. Expenditures on the project were as follows: January 1, 2021 $ 1,080,000 March 1, 2021 900,000 June 30, 2021 320,000 October 1, 2021 700,000 January 31, 2022 720,000 April 30, 2022 1,035,000 August 31, 2022 1,800,000 On January 1, 2021, the company obtained a $3 million construction loan with a 10% interest rate. Assume the $3 million loan is not specifically tied to construction of the building. The loan was outstanding all of 2021 and 2022. The company’s other interest-bearing debt included two long-term notes of $5,000,000 and $7,000,000 with interest rates of 5% and 8%, respectively. Both notes were outstanding during all of 2021 and 2022. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required: Calculate the amount of interest that Mason should…