Seasons Construction is constructing an office building under contract for CannonCompany and uses the percentage-of-completion method. The contract calls forprogress billings and payments of $5,000,000 each year. The total contract price is$15,000,000 and Seasons estimates total costs of $12,000,00O. Seasons estimatesthat the building will take 3 years to complete, and commences construction onJanuary 2, 2021.At December 31, 2021, Seasons estimates that it is 30% complete with theconstruction, based on costs incurred, which are consistent with the originalestimate.Prepare the journal entries required in 2021, if any, to record construction costs,revenues, and billings.

The percentage of completion method is a method of recognizing revenues for contracts that span over…

Answered: Prepare the journal entries required in…

Business

Accounting

Prepare the journal entries required in 2021, if any, to record construction costs, revenues, and billings.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 10C

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On 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?
Sheridan Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1200000 each quarter. The total contract price is $18222000 and Sheridan estimates total costs of $17400000. Sheridan estimates that the building will take 3 years to complete, and commences construction on January 2, 2021.At December 31, 2021, Sheridan estimates that it is 20% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2021 and what is the balance in the Accounts Receivable account assuming Cannon Company has not yet made its last quarterly payment? Revenue Accounts Receivable $3480000 $1200000 $6074000 $6074000 $3480000 $6074000 $3644400 $1200000
Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2022, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18,000,000 due to unanticipated price increases. What is reported in the balance sheet at December 31, 2022 for Seasons as the difference between the Construction in Process and the Billings on Construction in Process accounts, and is it a debit or a credit? Difference between the accounts Debit/Credit a. $4,225,000 Credit b. $1,550,000 Debit c. $1,100,000 Debit d. $1,550,000 Credit
Oriole Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1650000 each quarter. The total contract price is $18762000 and Oriole estimates total costs of $17900000. Oriole estimates that the building will take 3 years to complete, and commences construction on January 2, 2021.At December 31, 2022, Oriole Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18100000 due to unanticipated price increases. What is reported in the balance sheet at December 31, 2022 for Oriole as the difference between the Construction in Process and the Billings on Construction in Process accounts, and is it a debit or a credit? Difference between the accounts Debit/Credit $871500 Credit $4690500 Credit $871500 Debit $375000 Debit
Oriole Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $2050000 each quarter. The total contract price is $18222000 and Oriole estimates total costs of $17100000. Oriole estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2021, Oriole estimates that it is 20% complete with the construction, based on costs incurred.At December 31, 2022, Oriole Construction estimates that it is 70% complete with the building; however, the estimate of total costs to be incurred has risen to $17300000 due to unanticipated price increases. What is the total amount of Construction Expenses that Oriole will recognize for the year ended December 31, 2022? $8690000 $8325600 $12110000 $8465600
YellowStone Construction is constructing an office building under contract for LimeStone Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1300000 each quarter. The total contract price is $15600000 and YellowStone estimates total costs of $17500000. YellowStone estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2022, YellowStone Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $17750000 due to unanticipated price increases.YellowStone Construction completes the remaining 25% of the building construction on December 31, 2023, as scheduled. At that time the total costs of construction are $18500000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that YellowStone will recognize for the year ended December 31, 2023? Revenue Expenses…
Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete and commences construction on January 2, 2024. At December 31, 2024, Seasons estimates that it is 30% complete with the construction, based on costs incurred. By December 31, 2025, Seasons estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18,000,000 due to unanticipated price increases. What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2025? $13,500,000 O $7,875,000 $7,987,500 O $8,175,000
Blossom Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1450000 each quarter. The total contract price is $18492000 and Blossom estimates total costs of $17650000. Blossom estimates that the building will take 3 years to complete, and commences construction on January 2, 2018. At December 31, 2018, Blossom estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long- Term Contracts recognized for 2018 and what is the balance in the Accounts Receivable account assuming Cannon Company has not yet made its last quarterly payment? Revenue $6164000 $5547600 $5295000 $5295000 O Option A Option B O Option C Accounts Receivable $6164000 $1450000 $1450000 $6164000
Ivanhoe Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $900000 each quarter. The total contract price is $17898000 and Ivanhoe estimates total costs of $18100000. Ivanhoe estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2021, Ivanhoe estimates that it is 30% complete with the construction, based on costs incurred.At December 31, 2022, YellowStone Construction estimates that it is 70% complete with the building; however, the estimate of total costs to be incurred has risen to $18300000 due to unanticipated price increases. What is the total amount of Construction Expenses that Ivanhoe will recognize for the year ended December 31, 2022? $7440600 $7380000 $7300600 $12810000
Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2018. In 2018, it incurs cost of $5,325,000. At December 31, 2019, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18,000,000 due to unanticipated price increases. What is the cost that Seasons has incurred during the year ended December 31, 2019? Group of answer choices $7,875,000 $8,175,000 $7,987,500 $13,500,000
A construction company is constructing an office building under contract for Codwell Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and the construction company estimates total costs of $17,750,000. They also estimate that the building will take 3 years to complete, and commences construction on January 2, 2021.At December 31, 2021, the construction company estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2021 and what is the balance in the Accounts Receivable account assuming Codwell Company has not yet made its last quarterly payment? Revenue Accounts Receivable Question 2 options: a $6,200,000 $6,200,000 b $5,325,000 $1,550,000 c $5,580,000 $1,550,000 d $5,325,000…
SMDC Construction is constructing an office building under contract for Onyx Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of P1,550,000 each quarter. The total contract price is P18,600,000 and SMDC Construction estimates total costs of P17,750,000. SMDC Construction estimates that the building will take 3 years to complete, and commences construction on January 2, 2018. SMDC Construction completes the remaining 25% of the building construction on December 31, 2020, as scheduled. At that time the total costs of construction are P18,750,000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that SMDC Construction will recognize for the year ended December 31, 2020? Revenue Expenses A. P18,600,000 P18,750,000 B. P4,650,000 P 4,687,500 C. P4,650,000 P 5,250,000 D. P4,687,500 P 4,687,500 Group of answer choices D C B A