Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 8, Problem 8.14E
To determine
To prepare: The
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Morneau Contractors Inc. agreed to construct a building for $475,000 Construction commenced in 2023 and was completed in 2025 Data Pelating to the
below.
(Click the icon to view the contract data.)
Required
a. For each of the three years, determine the following amounts relating to the above contract revenue, expenses, gross profit, accounts receivable balance, and
construction-in-process inventory balance
b. Record the journal entries using T-accounts
Requirement a For each of the three years, d
decimal places, XXX% Round your final answ
2023
Revenues-current year
Expenses
Gross profit (loss)
pages Get more help -
19
7
Contract data
Costs incurred during the year
Estimated costs to complete
Billings during year
Collections during year
Estimated profit on contract
S
Print
2023
114,155 S
280,045
95,000
85.000
Done
2024
210 215 5
73,630
213,760
208.750
2025
130 630
166 250
181.250
DICHT UM
fact are summarize
X
cent complete to two
Check answer
BOLDLE
On 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?
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 8 Solutions
Intermediate Accounting (2nd Edition)
Ch. 8 - What are the primary issues involved in revenue...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - Prob. 8.4QCh. 8 - Prob. 8.5QCh. 8 - How is a performance obligation defined?Ch. 8 - What are the two criteria to define a good or...Ch. 8 - Prob. 8.8QCh. 8 - What principles regarding timing and measurement...Ch. 8 - Prob. 8.10Q
Ch. 8 - What is variable consideration and what factors...Ch. 8 - Describe and contrast the two approaches used to...Ch. 8 - Prob. 8.13QCh. 8 - What factors should accountants consider to...Ch. 8 - Prob. 8.15QCh. 8 - How does a seller account for any consideration...Ch. 8 - Prob. 8.17QCh. 8 - What are the two exceptions to the general rule...Ch. 8 - What are the three criteria required to recognize...Ch. 8 - When an entity does not meet the three criteria...Ch. 8 - Prob. 8.21QCh. 8 - Prob. 8.22QCh. 8 - How does a firm estimate the degree completed...Ch. 8 - Can a firm record inventory out on consignment as...Ch. 8 - What method do agents in a transaction use to...Ch. 8 - Prob. 8.26QCh. 8 - What qualitative disclosures do the standards...Ch. 8 - All of the following are elements of a contract...Ch. 8 - Prob. 8.2MCCh. 8 - Telecom Co. enters into a two-year contract with a...Ch. 8 - The transaction price must reflect the time value...Ch. 8 - Prob. 8.5MCCh. 8 - When allocating the transaction price to separate...Ch. 8 - Which of the following indicators is not...Ch. 8 - During Yoar 1 Moriwothor Construction Company...Ch. 8 - All of the following are indicators that the...Ch. 8 - Prob. 8.10MCCh. 8 - Prob. 8.11MCCh. 8 - Identify a Contract with a Customer. Complete the...Ch. 8 - Prob. 8.2BECh. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Estimating Variable Consideration. Gear Garage...Ch. 8 - Estimating Variable Consideration. Using the...Ch. 8 - Estimating Variable Consideration. Sellet...Ch. 8 - Estimating Variable Consideration. Seliet...Ch. 8 - Prob. 8.9BECh. 8 - Allocation of Transaction Price. Martin Software...Ch. 8 - Prob. 8.11BECh. 8 - Allocation of Transaction Price. Sycamore Sidewalk...Ch. 8 - Allocation of Transaction Price. Sycamore enters...Ch. 8 - Prob. 8.14BECh. 8 - Allocation of Transaction Price. Using the...Ch. 8 - When to Recognize Revenue. For each scenario...Ch. 8 - Prob. 8.17BECh. 8 - Prob. 8.18BECh. 8 - Percentage-of-Completion Method, Journal Entries....Ch. 8 - Prob. 8.20BECh. 8 - Sales with the Right of Return. Both incorporated...Ch. 8 - Sales with the Right of Return. Using the...Ch. 8 - Sales Returns. Historically, about 5% or the...Ch. 8 - Sales on Consignment. Hanna Lighting recertify...Ch. 8 - Determining Performance Obligations. Pagit Inc, a...Ch. 8 - Prob. 8.2ECh. 8 - Estimating Variable Consideration. King Rat Pest...Ch. 8 - Prob. 8.4ECh. 8 - Prob. 8.5ECh. 8 - Prob. 8.6ECh. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Prob. 8.9ECh. 8 - Prob. 8.10ECh. 8 - Determination of When to Recognize Revenue. Far...Ch. 8 - Prob. 8.12ECh. 8 - Percentage-of-Completion Method. Gary Construction...Ch. 8 - Prob. 8.14ECh. 8 - Prob. 8.15ECh. 8 - Prob. 8.16ECh. 8 - Sales with the Right of Return. Webster Hall, Inc....Ch. 8 - Prob. 8.18ECh. 8 - Prob. 8.19ECh. 8 - Other Principal Agent Transactions, Net Revenue...Ch. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Comprehensive Revenue Recognition Problem. Casale...Ch. 8 - Prob. 8.4PCh. 8 - Determining When to Recognize Revenue. Megrew...Ch. 8 - Prob. 8.6PCh. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Percentage-of-Completion Method. R Wayne Computer...Ch. 8 - Prob. 8.10PCh. 8 - Prob. 8.11PCh. 8 - Sales on Consignment. Pablo Products. Ltd sells...Ch. 8 - Prob. 1JCCh. 8 - Prob. 1FSCCh. 8 - Prob. 1SSCCh. 8 - Basis for Conclusions Case 1: Control According to...
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
- 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 $ 192000arrow_forwardEntity 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.arrow_forwardThe Nick Construction Company uses the percentage completion method to record long-term contracts. Information for the most recent years is shown below. 2019 2020 2021 Costs incurred to date 300,000 900,000 1,600,000 Estimated Costs to complete 1,200,000 700,000 0 Billings to date 250,000 800,000 2,000,000 Collections to date 175,000 700,000 2,000,000 Required: Prepare the journal entries for 2019 and 2020 necessary to recordarrow_forward
- At the beginning of 2021, Batangas Road Construction entered into a contract to build a road for the government. Construction will take four years. The following information as of December 31, 2021 is available for the contract: Total revenue according to contract 10,000,000 Total expected cost 8,000,000 Cost incurred during 2021 1,200,000 Assume that the company estimated percentage complete based on costs incurred as a percentage of total estimated costs. Under the completed contract method, how much revenue will be reported in 2021? None 300,000 1,500,000arrow_forwardRustic Construction Company uses the percentage of completion method of recognizing revenue on construction contracts. It uses full accrual accounting and prepares monthly financial statements. Rustic’s records showed the following data relating to the construction of an office building: Total contract awarded $99,600Total estimated costs on the project $99,600 - $18,000Payments from the buyer on April 25th = 30% of contractPayments from the buyer on June 17th = 30% of contractPayments from the buyer on July 30th = 40% of contractCosts incurred on the project and billed for the month of April = 40% of totalCosts incurred on the project and billed for the month of May = 30% of totalCosts incurred on the project and billed for the month of June = 30% of totalProject was completed at the end of month 3. Required 1: Assuming no other transaction happened, what is the balance of Accounts Receivables at April 30th? $ Required 2: Assuming no other transaction happened, what is the…arrow_forward1. Prepare a schedule showing the revenue, cost and gross profit earned each year using thepercentage of completion method, using the engineer’s estimate as a measure ofcompletion.2. Prepare all journal entries required to reflect the contract3. Prepare journal entries for 2020 assuming zero profit method is used.arrow_forward
- In 2018, the Laguna Inc entered into a contract to construct a road for 5th Avenue for $14,000,000. The road was completed in 2018. Information related to the contract is as follows: Laguna uses the percentage-of-completion method of accounting for long-term construction contracts. Required: Calculate the amount of gross profit to be recognized in each of the three years. Prepare all necessary journal entries for each of the years (credit various accounts for construction costs incurred). Prepare a partial balance sheet for 2016 and 2017 showing any items related to the contract.arrow_forwardOn July 1, 2025, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2027, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2025, 2026, and 2027. Total contract price $ 2,200,000 Contract costs incurred to date Estimated costs to complete the contract Progress Billings to Gumbel during year Instructions a. b. At 12/31/25 At 12/31/26 At 12/31/27 300,000 $1,200,000 $ 2,100,000 $ 1,200,000 300,000 800,000 1,100,000 800,000 Using the percentage-of-completion method, prepare a schedule to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2025, 2026, and 2027. (Ignore income taxes.) Using the cost recovery method, prepare a schedule to compute the profit or…arrow_forwardHelp me with: 4. Prepare all journal entries related to this project for Jorg for all 3 years. 5. How will this project be carried on the balance sheet for 2019, 2020, and 2021? Jorg is building an office building for Wilmington Company for $20,000,000. The contract has the following characteristics: • The office building is built to the customer’s specifications and the customer can make changes to these specifications over the contract term. • Progress payments are made by the customer throughout construction. • The customer can cancel the contract at any time (with a termination penalty); any work in process is the property of the customer. Jorg provides you with the following details: December 31 2019 2020 2021 Costs incurred to date $8,000,000 $16,000,000 $18,000,000 Estimated costs to complete 6,000,000 3,000,000 — Billings to date 8,000,000 16,000,000 20,000,000 Collections to date 6,000,000 12,000,000 18,000,000arrow_forward
- In 2020, Blue Construction Corp. began construction work under a 3-year contract. The contract price was $1,060,000. Blue uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2020, are shown below. Balance Sheet Accounts receivable $16,600 Construction in process $63,700 Less: Billings 65,400 Costs and recognized profit in excess of billings -1,700 Income Statement Income (before tax) on the contract recognized in 2020 $19,110 (a) How much cash was collected in 2020 on this contract? Portion of contract billings collected $enter a dollar amount (b) What was the initial estimated total income before tax on this contract? Income before tax on this contract $enter a…arrow_forwardOn December 1, 2020, Shyam Construction Co. entered into a contract with a customer for the construction of a building. The contract prices are $44,00,000, which is to be billed to the customers periodically based on Shyam's progress on the construction. The estimated total contract cost is $28,00,000. The actual costs incurred in 2020 amounts to $12,00,000. Requirement: The revenue to be recognized in 2020arrow_forwardYou were engaged to audit the books of accounts of A. Bonifacio contractors which had a 3 year construction contract in 2020 for Php 900,000. A Bonifacio uses the percentage of completion method for financial statement purposes. Income to be recognized each year is based on the ratio of cost incurred to total estimated cost to complete the contract. Data on this contract follows: Accounts receivable construction contract billings Php 30,000 Construction in progress 93,750 Less: Amounts billed 84,375 10% retention Php 9,375 Net Income recognized in 2020 (before tax) Php 15,000 A. Bonifacio contractors maintains a separate bank account for each construction contract. Bank deposits to this contract amounted to Php 50,000 Required: 6. How much cash was collected on the contract that was not yet deposited as at December 31, 2020? Thank youarrow_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
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning