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    Week 1 - P 18 - 3

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    Shynasty Wilkes
    This document provides information about a long-term construction contract for Chance Company to build an apartment building from 2010 to 2012. It includes costs incurred each year, progress billings, cash collected, and calculations to recognize gross profit under the percentage-of-completion method in each year. Journal entries are provided for 2012 transactions and a partial balance sheet is presented for December 31, 2011 showing receivables and construction in process accounts.

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    Week 1 - P 18 - 3

    Uploaded by

    Shynasty Wilkes
    14 views1 page
    This document provides information about a long-term construction contract for Chance Company to build an apartment building from 2010 to 2012. It includes costs incurred each year, progress billings, cash collected, and calculations to recognize gross profit under the percentage-of-completion method in each year. Journal entries are provided for 2012 transactions and a partial balance sheet is presented for December 31, 2011 showing receivables and construction in process accounts.

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    Week 1_ P 18_3

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    This document provides information about a long-term construction contract for Chance Company to build an apartment building from 2010 to 2012. It includes costs incurred each year, progress billings, cash collected, and calculations to recognize gross profit under the percentage-of-completion method in each year. Journal entries are provided for 2012 transactions and a partial balance sheet is presented for December 31, 2011 showing receivables and construction in process accounts.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    14 views1 page

    Week 1 - P 18 - 3

    Uploaded by

    Shynasty Wilkes
    This document provides information about a long-term construction contract for Chance Company to build an apartment building from 2010 to 2012. It includes costs incurred each year, progress billings, cash collected, and calculations to recognize gross profit under the percentage-of-completion method in each year. Journal entries are provided for 2012 transactions and a partial balance sheet is presented for December 31, 2011 showing receivables and construction in process accounts.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 1

    Name: Problem: Course: Date:

    P18-3, Recognition of Profit and Entries on Long-term Contract

    On March 1, 2010, Chance Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,000,000 and will take 3 years to complete. The contract price was $3,000,000 The information that follows pertains to the construction period: 2010 $600,000 1,400,000 1,050,000 950,000 2011 $1,560,000 520,000 2,000,000 1,950,000 2012 $2,100,000 0 3,000,000 2,850,000

    Costs to date: Estimated costs to complete: Progress billing to date: Cash collected to date:

    Instructions: (a) Compute the amount of gross profit to be recognized each year assuming the percentage-of-completion method is used. Gross profit recognized in: 2010 $3,000,000 $600,000 1,400,000 $1,560,000 520,000 2011 $3,000,000 2012 $3,000,000 $2,100,000 2,080,000 920,000 75% 690,000 300,000 $390,000 2,100,000 900,000 100% 900,000 690,000 $210,000

    Contract price Costs: Costs to date Estimated costs to complete Total estimated profit Percentage completed to date Total gross profit recognized Less: GP recognized in previous years Gross profit recognized in current year

    2,000,000 1,000,000 30% 300,000 0 $300,000

    (b) Prepare all necessary journal entries for 2012. Construction in Process Materials, Cash, Payables, etc. Accounts Receivable Billings on Construction in Process Cash Accounts Receivable Construction in Process (gross profit) Construction Expenses Revenue from Long-term Contracts Billings on Construction in Process Construction in Process 540,000 540,000 1,000,000 1,000,000 900,000 900,000 210,000 540,000 750,000 3,000,000 3,000,000

    (c) Prepare a partial balance sheet for December 31, 2011, showing the balances in the receivables and inventory accounts. CHANCE COMPANY Balance Sheet (Partial) December 31, 2011 Current assets: Accounts receivable Inventories Construction in Process Less: Billings Costs and recognized gross profit in excess of billings $50,000 $2,250,000 2,000,000 $250,000

    Problem 18-3, Page 1 of 1, 5/2/2012, 8:31 PM

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