The board of directors of Ivanhoe Construction Company is meeting to choose between the cost-recovery method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Ivanhoe's controller in the preparation of a presentation to be given at the board meeting. The controller provides you with the following information: 1. Ivanhoe commenced doing business on January 1, 2024. 2. Construction activities for the year ended December 31, 2024, were as follows: Project Total Contract Price Billings Through 12/31/24 Cash Collections Through 12/31/24 Contract Costs Incurred Through Estimated 12/31/24 Additional Costs to Complete Contract A $504,000 $344,000 $314,000 $428,000 $105,000 B 724,000 214,000 214,000 201,000 469,000 C 477,000 479,000 394,000 354,000 -0- D 202,000 104,000 67,000 127,000 101,000 E 454,000 404,000 404,000 324,000 81,000 $2,361,000 $1,545,000 $1,393,000 $1,434,000 $756,000 3. Each contract is with a different customer. 4. Any work remaining to be done on the contracts is expected to be completed in 2025. (a) Your answer is incorrect. Compute the amount of income (or loss) before selling, general, and administrative expenses for the year ended December 31, 2024, which would be reported under: (1) The cost-recovery method. $ 133000 (2) The percentage-of-completion method (based on estimated costs). $ 140626
The board of directors of Ivanhoe Construction Company is meeting to choose between the cost-recovery method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Ivanhoe's controller in the preparation of a presentation to be given at the board meeting. The controller provides you with the following information: 1. Ivanhoe commenced doing business on January 1, 2024. 2. Construction activities for the year ended December 31, 2024, were as follows: Project Total Contract Price Billings Through 12/31/24 Cash Collections Through 12/31/24 Contract Costs Incurred Through Estimated 12/31/24 Additional Costs to Complete Contract A $504,000 $344,000 $314,000 $428,000 $105,000 B 724,000 214,000 214,000 201,000 469,000 C 477,000 479,000 394,000 354,000 -0- D 202,000 104,000 67,000 127,000 101,000 E 454,000 404,000 404,000 324,000 81,000 $2,361,000 $1,545,000 $1,393,000 $1,434,000 $756,000 3. Each contract is with a different customer. 4. Any work remaining to be done on the contracts is expected to be completed in 2025. (a) Your answer is incorrect. Compute the amount of income (or loss) before selling, general, and administrative expenses for the year ended December 31, 2024, which would be reported under: (1) The cost-recovery method. $ 133000 (2) The percentage-of-completion method (based on estimated costs). $ 140626
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 25E: Koolman Construction Company began work on a contract in 2019. The contract price is 3,000,000, and...
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Transcribed Image Text:The board of directors of Ivanhoe Construction Company is meeting to choose between the cost-recovery method and the
percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been
engaged to assist Ivanhoe's controller in the preparation of a presentation to be given at the board meeting. The controller provides
you with the following information:
1.
Ivanhoe commenced doing business on January 1, 2024.
2. Construction activities for the year ended December 31, 2024, were as follows:
Project
Total Contract
Price
Billings Through
12/31/24
Cash Collections
Through 12/31/24
Contract Costs
Incurred Through
Estimated
12/31/24
Additional Costs to
Complete Contract
A
$504,000
$344,000
$314,000
$428,000
$105,000
B
724,000
214,000
214,000
201,000
469,000
C
477,000
479,000
394,000
354,000
-0-
D
202,000
104,000
67,000
127,000
101,000
E
454,000
404,000
404,000
324,000
81,000
$2,361,000
$1,545,000
$1,393,000
$1,434,000
$756,000
3.
Each contract is with a different customer.
4.
Any work remaining to be done on the contracts is expected to be completed in 2025.
(a)
Your answer is incorrect.
Compute the amount of income (or loss) before selling, general, and administrative expenses for the year ended December 31,
2024, which would be reported under:
(1)
The cost-recovery method.
$
133000
(2)
The percentage-of-completion method (based on estimated costs).
$
140626
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