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 1,500,000

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 1,500,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: How much gross profit should be reported for 2021?

A: Percentage-of-Completion Method-: The Percentage of Completion Method comes under the revenue…

Q: Double Dragon receives a contract to build a building over a period of 3 years for a price of…

Q: In 2024, the Westgate Construction Company entered into a contract to construct a road for Santa…

A: The question is based on the concept of Financial Accounting. In the case of construction contracts…

Q: n 2021, the Westgate Construction Company entered into a contract to construct a road for Santa…

A: >Revenues from contracts can be recorded using various methods. >Most common of these…

Q: 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara…

A: Journal entry is the process of documenting commercial transactions for the first time in the books…

Q: Measure the contract revenue and the contract cost in the Statement of Profit or Loss for the year…

Q: In 2021, Cupid Construction Co. (CCC) began work on a two-year fixed price contract project. CCC…

A: The cash that remains to be collected is calculated by deducting the cash received from the contract…

Q: In 2024, the Westgate Construction Company entered into a contract to construct a road for Santa…

A: Construction contracts are the long-term contract because the work of construction generally takes…

Q: In 2024, the Westgate Construction Company entered into a contract to construct a road for Santa…

A: Construction contracts are necessary to keep communication between all parties engaged in a project…

Q: Novak, Inc. began work on a $ 6,466,000 contract in 2020 to construct an office building. During…

A: Total estimated cost = Cost incurred + estimated additional costs to complete =…

Q: Roe Construction Company uses the percentage-of-completion method of accounting. In 2021, Roe began…

A: Under the Percentage of completion method, the revenue is recognized at different stages as agreed…

Q: In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa…

A: Percentage of completion is one of the method of recognition of revenue of a construction contract.…

Q: Suppose that a contract is started on January 1, 2018, with an estimated completion date of December…

A: 1. Percentage of completion at work certification = (Work certified / Contract Price )x 100…

Q: d. Current Liability of $875

A: Cost incurred to date 2,500 Estimate cost to complete 9,500 Total cost 12,000 %…

Q: At the beginning of 2009, Florida Road Construction entered into a contract to build a road for the…

A: Revenue Recognition: Revenue recognition is the recording of revenues in the books of the company…

Q: In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa…

A: According to principle of conservatism profit is recorded in the books only when it is earned it is…

Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

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
1,500,000

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

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

How much is income from construction for 2019? Please refer to the picture below to answer the question.
At the beginning of 2021, Florida 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: Revenue according to contract 10,000,000 Total expected cost 8,000,000 Cost incurred during 2021 1,200,000 Cost incurred during 2022 2,400,000 Cost incurred during 2023 Cost incurred during 2024 1,600,000 2,800,000 Compute for the reported Gross Profit of Florida using: Year 2021 2022 2023 2024 Completed Contract Method Zero Profit Method Percentage of Completion Method
On February 1, 2023, Sandhill Contractors agreed to construct a building at a contract price of $3,460,000. The total estimated construction costs would be $1,890,000 and the project would be finished in 2025. Information relating to the costs and billings for this contract is as follows: Total costs incurred to date Estimated costs to complete Customer billings to date Collections to date 2023 Gross profit/ (loss) 689,850 1,200,150 1,100,000 1,000,000 2023 2024 573050 $1,162,000 $ 2,365,000 913,000 1,890,000 1,750,000 2025 Calculate the gross profit / (loss) that should be recognized for 2023, 2024, and 2025 using the percentage completion method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round percentage complete to 1 decimal place, e.g. 15.2% and final answers to O decimal places, e.g. 5,125.) 2024 -0- 3,460,000 2,950,000 -107450 $ LA 2025 40450
In 2021, Cupid Construction Co. (CCC) began work on a two-year fixed price contract project. CCC recognizes revenue over time according to percentage of completion for this contract, and provides the following information (dollars in millions): Accounts receivable, 12/31/2021 (from construction progress billings) $ 37.5 Actual construction costs incurred in 2021 $ 135 Cash collected on project during 2021 $ 105 Construction in progress, 12/31/2021 $ 207 Estimated percentage of completion during 2021 60 % How much cash remains to be collected by CCC on the project?
1. 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.
In 2021, Montana Corp. entered into a contract to begin work on a two-year project. Montana recognizes revenue over time according to percentage of completion for this contract, and provides the following information (dollars in millions): Accounts receivable, 12/31/2021 (from construction progress billings) $37.5 $140 Actual construction costs incurred in 2021 Cash collected on project during 2021 $105 Construction in progress, 12/31/2021 $210 Estimated percentage of completion during 2021 Selected Amounts O $70,000,000 What is the amount of gross profit on the project recognized by Montana during 2021? O $60,000,000 $35,000,000 O $105,000,000 50 %
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 $ $ $
In 2024, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2026. Information related to the contract is as follows: 2025 Cost incurred during the year. Estimated costs to complete as of year-end Billings during the year 2024 $ 2,059,000 5,041,000 2,190,000 $ 2,627,000 2,414,000 2,496,000 2026 $ 2,655,400 0 5,314,000 Cash collections during the year 1,895,000 2,400,000 5,705,000 Westgate recognizes revenue over time according to percentage of completion. Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. Note: Do not round intermediate calculations. Loss amounts should be indicated with a minus sign. Revenue Gross profit (loss) 2024 2025 2026
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2021. Information related to the contract is as follows. Cost incurred during year $2,016,000 $2,808,000 $2,613,000 Estimated costs to complete as of year-end 5,184,000 2,376,000 0 Billings during the year 2,180,000 2,644,000 5,176,000 Cash collections during the year 1,890,000 2,500,000 5,610,000 Westgate recognizes revenue over time according to percentage of completion Required 1.- Calculate the amount of revenue and gross profit (loss) to be organized in each of three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)…
In 2024, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2026. Information related to the contract is as follows: 2025 2024 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year $ 2,523,000 6,177,000 2,070,000 $ 3,177,000 2026 $ 1,980,000 1,800,000 0 3,630,000 Cash collections during the year 1,835,000 3,400,000 4,300,000 4,765,000 Westgate recognizes revenue over time according to percentage of completion. Problem 6-10 (Algo) Part 5 5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years, assuming the following costs incurred and costs to complete information. Note: Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign. Costs incurred during the year Estimated costs to complete as of year-end 2024 2025…
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
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows: 2018 2019 2020 Cost incurred during the year $ 2,184,000 $ 3,510,000 $ 2,316,600 Estimated costs to complete as of year-end 5,616,000 2,106,000 0 Billings during the year 2,120,000 3,574,000 4,306,000 Cash collections during the year 1,860,000 3,400,000 4,740,000 Westgate recognizes revenue over time according to percentage of completion. rev: Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.) 2018 2019 2020 Cost incurred during the year $ 2,184,000 $ 3,860,000 $ 3,260,000 Estimated costs to complete as…