On March
1, 2014, Chance Company entered into a contract to build an apartment building.
Gross profit recognized in:
(b) Prepare all necessary journal entries for 2016.
(c) Prepare a partial balance sheet for December 31, 2015, showing the balances in the receivables and inventory accounts.
Gross profit recognized in:
File name: P18-3 Chance Company.xls File
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P18-3 (Recognition of
Profit and Entries on Long-Term Contract) On March
1, 2014, 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 following information pertains
to the construction period.
|
2014
|
2015
|
2016
|
|
|
Costs to date:
|
$600,000
|
$1,560,000
|
$2,100,000
|
|
Estimated costs to complete:
|
1,400,000
|
520,000
|
0
|
|
Progress billing to date:
|
1,050,000
|
2,000,000
|
3,000,000
|
|
Cash collected to date:
|
950,000
|
1,950,000
|
2,850,000
|
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:
(b) Prepare all necessary journal entries for 2016.
(c) Prepare a partial balance sheet for December 31, 2015, showing the balances in the receivables and inventory accounts.
SOLUTION
PREVIEW
(a) Compute
the amount of gross profit to be recognized each year assuming the
percentage-of-completion method is used. Gross profit recognized in:
|
2014
|
2015
|
2016
|
||||
|
Contract price
|
|
$3,000,000
|
|
$3,000,000
|
|
$3,000,000
|
|
Costs:
|
|
|
|
|
|
|
|
Costs to date
|
$600,000
|
|
$1,560,000
|
|
$2,100,000
|
|
