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Big Construction Company signs a contract on 1 July 2019, agreeing to build a warehouse for...
Big Construction Company signs a contract on 1 July 2019, agreeing to build a warehouse for Buyer Corporation Ltd at a fixed contract price of $10 million. Buyer Ltd will be in control of the asset throughout the construction process. Big Construction Company estimates that construction costs will be as follows: 2019 2.5 million 2020 $4 million 2021 $1.5 million The contract provides that Buyer Corporation Ltd will make payments on 31 December each year as follows: 2019 $2 million 2020 $5 million 2021 $3 million The contract is completed and accepted on 31 December 2021. Assume that actual costs and cash collections coincide with expectations and that cost (an input measure) is used as the basis for assessing progress on the construction contract. Big Construction Company has a financial year ending 31 December. Required: a) Using the above data, compute the gross profit to be recognised for each of the three years, assuming that the outcome of the contract can be reliably estimated. (1.5 marks) b) Prepare the journal entries for 2019, 2020 and 2021 financial year to recognise revenue on the assumption that the measure of progress on the contract can be reliably estimated. c) Prepare the journal entries for 2019, 2020 and 2021 financial year, assuming that the measure of progress on the contract cannot be reliably assessed. (3.5 marks
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ekkarill92 answered 2 years agoRelated Solutions
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Cullumber Construction enters into a contract with a customer to build a warehouse for $1070000 on...
Cullumber Construction enters into a contract with a customer to
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bonus of $40000 if the building is completed by July 31, 2021. The
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Cullumber commonly includes these completion bonuses in its
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Completed by
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August 7, 2021
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PRACTICAL QUESTION Tiger Construction Ltd signs a contract on 1 May 2018 to build a...
PRACTICAL QUESTION
Tiger Construction Ltd signs a contract on 1 May 2018 to build a
theme park. The construction is scheduled to commence on 1 July
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period:
For the year ended 30 June
2019
2020
2021
$
$
$
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1,700,000
3,000,000...
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Stoney Run Construction Company (U.S. GAAP) enters into a 3-year
contract to build a new warehouse facility. Information for Years
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Year 1
Year 2
Year 3
Sale price
$2,800,000
$2,800,000
$2,800,000
Estimated
costs
1,600,000
2,000,000
2,000,000
Costs incurred to
date (paid in cash)
400,000
900,000
2,000,000
Billed to
date
250,000
1,150,000
2,800,000
Received in cash
to date
190,000
950,000
2,800,000
COST RECOVERY METHOD (IFRS)
Question 1: Calculate the Gross Profit booked in Year...
Stoney Run Construction Company (U.S. GAAP) enters into a 3-year contract to build a new warehouse...
Stoney Run Construction Company (U.S. GAAP) enters into a 3-year
contract to build a new warehouse facility. Information for Years
1, 2, and 3 is shown below:
Year 1
Year 2
Year 3
Sale price
$2,800,000
$2,800,000
$2,800,000
Estimated costs
1,600,000
2,000,000
2,000,000
Costs incurred to date (paid in cash)
400,000
900,000
2,000,000
Billed to date
250,000
1,150,000
2,800,000
Received in cash to date
190,000
950,000
2,800,000
Question 4:
Calculate the gross profit booked in Year 2:
Question 5:
Book...
Question 8 Queens Construction Company commences construction of a harbour on 1 July 2020. It signs...
Question 8
Queens Construction Company commences construction of a
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construction was $300 million. The expected costs to complete a
construction project can change throughout the project. The
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2021
2022
2023
($ M)
($ M)
($ M)
Costs for...
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after additional costs of...
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On February 1, 2018, Arrow Construction Company entered into a
three-year construction contract to build a bridge for a price of
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