Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 17, Problem 9MC
To determine
Compute the amount contract costs incurred during the year ended December 31, 2020.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
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
In 2021, Crane Corporation began construction work under a three-year contract. The contract price is $ 480000. Crane uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2021, follow:
Balance Sheet
Accounts receivable—construction contract billings
$ 192000
Construction in progress
$ 600000
Less contract billings
480000
Costs and recognized profit in excess of billings
120000
Income Statement
Income (before tax) on the contract recognized in 2021
$ 120000
How much cash was collected in 2021 on this contract?
$ 480000
$ 48000
$ 288000
$ 192000
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Koolman Construction Company began work on a contract in 2019. The contract price is 3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows: Required: 1. Compute the gross profit or loss recognized in 2019 and 2020. 2. Prepare the appropriate sections of the income statement and ending balance sheet for each year.arrow_forwardOn March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?arrow_forwardOn January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.arrow_forward
- How much is the contract revenue to date in the year 2019? Double Dragon receives a contract to build a building over a period of 3 years for a price of P14,000,000. Information relating to the performance of the contract is summarized as follows: 2019 Construction Costs incurred- yearly 3,000,000 4,840,000 3,360,000 2017 2018 Estimated Costs to Complete 7,000,000 3,360,000 Billings during the year 2,400,000 5,200,000 6,400,000 Collections during the year 2,000,000 5,400,000 6,600,000arrow_forwardUsing the percentage-of-completion method, prepare schedules to compute theprofit or loss to be recognized as a result of this contract and all the necessaryjournal entriesarrow_forwardIn 2019, PJD Construction Corporation began construction work under a 3-year contract. The contract price was P4,000,000. PJD uses the percentage-of-completion method/over time for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentation relating to this contract at December 31, 2019 was as follows: What is the recognized revenue in 2019?arrow_forward
- The Lao Construction Company recognizes revenue over time according to percentage of completion for its long-term construction contracts. In 2024, Lao began work on a construction contract. Information on this contract at the end of 2024 is as follows: Cost incurred during the year $ 1,500,000 Estimated additional cost to complete 6,000,000 Gross profit recognized in 2024 250,000 What is the contract price (total revenue) on this contract?arrow_forwardBig Construction Company signs a contract on 1 July 2019, agreeing to build a warehouse for Buyer Corporation Ltd at a fixed contract price of $10 million. Buyer Ltd will be in control of the asset throughout the construction process. Big Construction Company estimates that construction costs will be as follows: 2019 2.5 million 2020 $4 million 2021 $1.5 million The contract provides that Buyer Corporation Ltd will make payments on 31 December each year as follows: 2019 $2 million 2020 $5 million 2021 $3 million The contract is completed and accepted on 31 December 2021. Assume that actual costs and cash collections coincide with expectations and that cost (an input measure) is used as the basis for assessing progress on the construction contract. Big Construction Company has a financial year ending 31 December. Required: a) Prepare the journal entries for 2019, 2020 and 2021 financial year, assuming that the measure of progress on the contract cannot be reliably assessed.arrow_forwardOn January 1, 2020, San Juan Builders Inc. accepted a long-term construction project to build a bridge. The outcome of the construction project can be estimated reliably and the contractor decided to employ cost to cost method. The following data are provided by the accountant and project manager concerning the contract price and construction costs for the three years of construction: Year 12/31/2022 12/31/2020 12/31/2021 Contract price as of the end of the year P10,000,000 P15,000,000 P20,000,000 Costs incurred during the year Р1,000,000 P5,000,000 P8,000,000 Estimated cost to complete at the end of the Р3,000,000 P4,000,000 P2,000,000 year What is San Juan Builders' realized gross profit / (loss) for the year ended December 31, 2022?arrow_forward
- Pharoah Construction entered into a contract to construct a bridge for a contract price of $2.95 million. Construction began in 2019 and was completed in 2021. Below are the details of the transactions related to the contract: 2019 2020 2021 Costs incurred during the year $649,000 $836,000 $693,900 Estimated costs to complete 1,427,800 515,000 0 Calculate the revenue, expenses and gross profit to be recognized each year using the percentage-of-completion method. (Round the percentage completion to 2 decimal places, e.g. 52.75% and other answers to 0 decimal places, e.g. 1,525.) 2019 2020 2021 Revenue $ $ $ Expenses Gross Profit $ $ $arrow_forwardBig Construction Company signs a contract on 1 July 2019, agreeing to build a warehouse for BuyerCorporation Ltd at a fixed contract price of $10 million. Buyer Ltd will be in control of the assetthroughout the construction process. Big Construction Company estimates that construction costs willbe as follows:2019 2.5 million2020 $4 million2021 $1.5 millionThe contract provides that Buyer Corporation Ltd will make payments on 31 December each year asfollows:2019 $2 million2020 $5 million2021 $3 millionThe contract is completed and accepted on 31 December 2021. Assume that actual costs and cashcollections coincide with expectations and that cost (an input measure) is used as the basis forassessing progress on the construction contract. Big Construction Company has a financial year ending31 December.Required:a) Using the above data, compute the gross profit to be recognized for each of the three years,assuming that the outcome of the contract can be reliably estimated. b) Prepare the…arrow_forwardA company has entered a construction contract on 1st January 2019. The contract will take 2 years to complete and the final contract price is OMR 6,000,000. At the end of first year 2019 the company incurred a cost of OMR 2,400,000 and 60% of work has been completed. Certificate for work completed have been issued to the value of OMR 3,600,000. It is estimated that a further cost of OMR1, 600, 000 will be incurred in the year 2020 to complete the contract. You are required to calculate the amount due from customer that will be accounted for the year 2019 a.OMR 3,400,000 b.OMR 3,600,000 c.None of the options d.OMR 3,800,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT