Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 17, Problem 9MC
To determine
Compute the amount contract costs incurred during the year ended December 31, 2020.
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In 2019, DJ Builders Construction agreed to construct an apartment building at a price of P2,000,000.
The information relating to the costs and billings for the contract is as follows:
2019
Direct and allocable costs to date..
Estimated costs yet to be incurred.
Customer billings each year.........
Collection of billings each year.
...P 560,000 P
1,040,000
..750,000
.560,000
2020
1,200,000
400,000
560,000
640,000
2021
P1,570,000
-0-
730,000
840,000
During 2020 the customer agrees to a variation with increases expected revenue from the contract by
P40,000 and causes additional costs of P20,000. At the end of 2020 there are materials stored on site
for use in 2021 which cost P16,000 during the period.
Required:
A. Prepare journal entries each year using:
1. Percentage-of-completion method/Over Time
2. Cost recovery method of construction accounting (Hybrid Method or Zero-profit Approach).
Entity A started a three-year contract to build a new office building on 1 April 2019. The contract had a fixed price of $90,000,000. The entity will satisfy the performance obligation over time.
The entity incurred costs to 31 March 2020 of $77,000,000 and estimated that a further $33,000,000 would need to be spent to complete the contract.
The entity measures the progress of contracts using work completed compared to the contract price.
At 31 March 2020, a surveyor valued the work completed to date at $63,000,000.
REQUIRED:
Measure the contract revenue and the contract cost in the Statement of Profit or Loss for the year ended 31 March 2020 respectively.
n January 1, 2021, ABC enters into a contract to construct a building for a customer. ABC identifies its performance obligation to satisfied over time.
ABC uses the input method based on costs to measure its progress on the contract. The contract price is P9M
Information on the construction is provided below:
2021
2022
2023
a. Contract cost incurred per year
2,760,000 3,540,000 500,000
b. Billing per year
50%
25%
25%
c. Collections on billings per year
d. Estimated costs to complete (at each yr. end) 4,140,000700,000
90%
90%
balance
Note:
Billings per year are stated as percentages of the contract price. The contract is non-cancellable.
The collection on billings in 2021 and 2022 are net of 10% retention. "Retention" is an amount withheld by the contracted and payable to the
contractor at the end of the contract when the project is completed and accepted.
Requirements;
a. Compute for the gross profits,
2021
2022
2023
Chapter 17 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 17 - Prob. 1GICh. 17 - Prob. 2GICh. 17 - When a company recognizes revenue during a period,...Ch. 17 - Prob. 4GICh. 17 - Prob. 5GICh. 17 - What is the proper accounting for a wholly...Ch. 17 - If a seller enters into more than one contract...Ch. 17 - Prob. 8GICh. 17 - Prob. 9GICh. 17 - Prob. 10GI
Ch. 17 - Prob. 11GICh. 17 - Prob. 12GICh. 17 - Prob. 13GICh. 17 - Prob. 14GICh. 17 - Prob. 15GICh. 17 - Prob. 16GICh. 17 - If the standalone selling price of a good or...Ch. 17 - Prob. 18GICh. 17 - Prob. 19GICh. 17 - If the sellers performance creates on asset (e.g.,...Ch. 17 - Describe input and output methods used to measure...Ch. 17 - Prob. 22GICh. 17 - Prob. 23GICh. 17 - Prob. 24GICh. 17 - Prob. 25GICh. 17 - A company should recognize revenue when a. the...Ch. 17 - A contract between one or more parties creates: a....Ch. 17 - Morgan Company and its customer agree to modify...Ch. 17 - Chlorine Corp. has a contract to deliver pool...Ch. 17 - Prob. 5MCCh. 17 - Prob. 6MCCh. 17 - In accounting for a long-term construction...Ch. 17 - Prob. 9MCCh. 17 - Prob. 10MCCh. 17 - CustomTee Inc. contracts with various customers to...Ch. 17 - Yankee Corp. agrees to provide Albany Company 24...Ch. 17 - Prob. 3RECh. 17 - Prob. 4RECh. 17 - LongDrive sells a specialized golf club that has...Ch. 17 - Prob. 6RECh. 17 - VolleyElite runs a volleyball program consisting...Ch. 17 - Enterprise Solutions Inc. licenses its...Ch. 17 - Prob. 9RECh. 17 - Magical Memories sells Florida theme park vacation...Ch. 17 - Prob. 11RECh. 17 - Robotics Inc. contracts with a customer to build a...Ch. 17 - CoolShoes sells its elite tennis shoes to sports...Ch. 17 - Using the information in RE17-13, what journal...Ch. 17 - GameDay sells recreational vehicles along with...Ch. 17 - Prob. 16RECh. 17 - Using the information provided in RE17-16, prepare...Ch. 17 - Prob. 18RECh. 17 - Prob. 19RECh. 17 - Company enters into a contract with Dearborn Inc....Ch. 17 - Consider each of the following scenarios: a. A...Ch. 17 - On August 1, 2019, Aiken Corp. enters into a...Ch. 17 - On January 1, 2019, Spring Fashions Inc. enters...Ch. 17 - On January 1, 2019, Loud Company enters into a...Ch. 17 - Assume the same facts as in El7-5. On July 1,...Ch. 17 - Assume the same facts as in E17-5 and ignore...Ch. 17 - Prob. 8ECh. 17 - GrillMaster Inc. sells an industry-leading line of...Ch. 17 - WaterWorld Inc. operates an aquarium and water...Ch. 17 - Prob. 11ECh. 17 - Jonas Consulting enters into a contract to provide...Ch. 17 - On March 1, 2019, Elkhart enters into a new...Ch. 17 - On January 5, 2019, ShoeKing Corp. sells for cash...Ch. 17 - On January 1, 2019, Piper Company entered into an...Ch. 17 - On January 1, 2019, Fulton Inc. enters into a...Ch. 17 - Prob. 17ECh. 17 - On December 1, 2019, AwakcAllNight Inc. sells...Ch. 17 - Rix Company sells home appliances and provides...Ch. 17 - Assume the same facts as in E17-19, except that...Ch. 17 - Crazy Computer Store sells a back-to-school bundle...Ch. 17 - Each of the following is an independent situation...Ch. 17 - Prob. 23ECh. 17 - Prob. 24ECh. 17 - Koolman Construction Company began work on a...Ch. 17 - Prob. 26ECh. 17 - Each of the following independent situations...Ch. 17 - JustKitchens Inc. provides services to restaurants...Ch. 17 - On January 1, 2019, ForeRunner Inc. enters into a...Ch. 17 - January 2, 2019, TI enters into a contract with...Ch. 17 - Prob. 5PCh. 17 - Prob. 6PCh. 17 - Fender Construction Company receives a contract to...Ch. 17 - SoccerHawk Merchandise Inc. enters into a 6-month...Ch. 17 - Prob. 9PCh. 17 - Prob. 10PCh. 17 - Blackmon Company provides locator services to the...Ch. 17 - Prior to ASU 2014-09 changing the principles...Ch. 17 - The first step in the revenue recognition process...Ch. 17 - Prob. 3CCh. 17 - One of the more difficult issues that companies...Ch. 17 - Prob. 5CCh. 17 - On October 1, 2019, Grahams WeedFeed Inc. signs a...Ch. 17 - On January 1, 2019, Mopps Corp. agrees to provide...Ch. 17 - Prob. 8CCh. 17 - Revenue for a company is recognized for accounting...Ch. 17 - Prob. 10C
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