AnnotatiThe Rushing Construction Companyobtained a construction contract tobuild a highway and bridge over theSnake River. It was estimated at the beginning of thecontract that it would take three years to complete theproject at an expected cost of $50,000,000 . Thecontract price was $60,000,000. The project actuallytook four years, being accepted as completed late in2016. The following information describes the status ofthe job at the close of production each year.20132014201520162017Actual cost incurred.$12,000,000$18,160,000 $14,840,000 $10,000,000 $Estimated cost to complete....38,000,00027,840,000 10,555,555Collections on contract12,000,00013,500,000 15,000,00015,000,0004,500,000Billings on contract....13,000,00015,500,000 17,000,00014,500,000 ull Lycamohiructions:1. What is the revenue, cost, and gross profitrecognized for each of the years 2013–2017undera. the percentage-of-completion method andb. the completed-contract method?2. Give the journal entries for each year assumingthat the percentage-of-completion method isused. (Note: Round percentage to nearest wholepercent for percentage completed.)

The percentage of completion method - It is an accounting method in which expenses and revenue of…

Answered: The Rushing Construction Company…

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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During 2023, Pharoah Company started a construction job with a contract price of $1,728, 000. The job was completed in 2025. The following information is available. The contract is non - cancellable. 2023 2024 2025 Costs incurred to date 432,000 891, 000 1, 155, 600 Estimated costs to complete 648, 000 297, 000 0 Billings to date 324, 000 972, 000 1,728, 000 1,539,000 Collections to date 291, 600 874, 800 Prepare all necessary journal entries for the Pharoah contract for 2024. ( Use Materials, Cash, Payables for costs incurred to date.)
Blue Construction Company began work on a $979,000 construction contract in 2017. During 2017, Blue incurred costs of $402,000, billed its customer for $318,000, and collected $238,000. At December 31, 2017, the estimated future costs to complete the project total $630,000. Prepare Archer's journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter O for the amounts. Round percent value to 2 decimal places, eg. 52.75 and final answers to O decimal places, eg.5,275) Account Titles and Explanation Debit Credit (a) (b)
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…
YellowStone Construction is constructing an office building under contract for LimeStone Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1300000 each quarter. The total contract price is $15600000 and YellowStone estimates total costs of $17500000. YellowStone estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2022, YellowStone Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $17750000 due to unanticipated price increases.YellowStone Construction completes the remaining 25% of the building construction on December 31, 2023, as scheduled. At that time the total costs of construction are $18500000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that YellowStone will recognize for the year ended December 31, 2023? Revenue Expenses…
During 2020, Pearl Company started a construction job with a contract price of $1,610,000. The job was completed in 2022. The following information is available. 2020 2021 2022 Costs incurred to date $393,900 $760,380 $1,059,000 Estimated costs to complete 616,100 341,620 –0– Billings to date 299,000 905,000 1,610,000 Collections to date 268,000 818,000 1,421,000 Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. Gross profit recognized in 2020 $enter a dollar amount Gross profit recognized in 2021 $enter a dollar amount Gross profit recognized in 2022 $enter a dollar amount eTextbook and Media List of Accounts Prepare all necessary journal entries for 2021. (Credit account titles are automatically indented when amount is entered. Do not…
During 2020, Bing Corp. started a construction job with a total contract price of $1,050,000. Bing has consistently used the completed contract method. The job was completed on December 15, 2021. Additional data are as follows: 2020 , 2021 Actual costs incurred =$405,000, $457,000 Estimated remaining costs =405,000, — Billings to date =360,000, 690,000 Collections to date= 200,000, 480,000 For 2021, what amount should Bing recognize as gross profit?
A company enters into a contract with a customer to build a building, with a performance bonus of $33,500 if the building is completed by September 30, 2021. The bonus is reduced by $5,000 each week that completion is delayed. The company commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by ProbabilitySeptember 30, 2021 70%October 7, 2021 15%October 14, 2021 10%October 21, 2021 5%The amount of revenue the company should recognize related to this bonus is $_______________.
During 2020, Skysong Company started a construction job with a contract price of $1,620,000. The job was completed in 2022. The following information is available. 2020 2021 2022 Costs incurred to date $383,800 $850,200 $1,074,000 Estimated costs to complete 626,200 239,800 –0– Billings to date 300,000 899,000 1,620,000 Collections to date 267,000 816,000 1,429,000 Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. Gross profit recognized in 2020 Gross profit recognized in 2021 Gross profit recognized in 2022 Prepare all necessary journal entries for 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. For costs incurred use account Materials, Cash, Payables.) Compute the amount of gross…
The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $270,000 at the end of each of the next two years. At the end of the third year, the company will receive payment of $620,000. The company can speed up construction by working an extra shift. In this case, there will be a cash outlay of $584,000 at the end of the first year followed by a cash payment of $620,000 at the end of the second year. Use the IRR rule to show the (approximate) range of opportunity costs of capital at which the company should work the extra shift. Note: Enter your answers as a percent rounded to 2 decimal places. Enter the smallest percent first. The company should work the extra shift if the cost of capital is between % and %.
Turner, Inc. began work on a $7,000,000 contract in 2017 to construct an office building. During 2017, Turner, Inc. incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2017, the estimated additional costs to complete the project total $3,300,000. Prepare Turner’s 2017 journal entries using the percentage-of completion method.
During 2020, Grouper Company started a construction job with a contract price of $1,590,000. The job was completed in 2022. The following information is available. 2020 2021 2022 Costs incurred to date $370,000 $869,790 $1,080,000 Estimated costs to complete 630,000 231,210 –0– Billings to date 302,000 900,000 1,590,000 Collections to date 267,000 804,000 1,415,000 (a) Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. Gross profit recognized in 2020 $enter a dollar amount Gross profit recognized in 2021 $enter a dollar amount Gross profit recognized in 2022 $enter a dollar amount

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