Question
In: Accounting
Rookie Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract...
Rookie Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract provided for progress payments. RCL’s accounting year ends December 31. Work began under the contract on August 1, 2019, and was completed on October 31, 2021. RCL uses the percentage-of-completion method to account for this long-term contract. Construction activities are summarized below:
|
2019 |
2020 |
2021 |
|
|
Construction costs incurred to date |
180,000 |
630,000 |
825,000 |
|
Estimated remaining costs to complete |
630,000 |
190,000 |
0 |
|
Progress Billings during the year |
153,000 |
382,500 |
439,500 |
|
Cash Collections to date |
140,000 |
430,500 |
975,000 |
Required: (round calculations to the nearest whole number)
- Prepare the journal entries that should be recorded for 2020. Assume that all of the 2019 journal entries have been properly recorded.
- What should be the balance of Accounts Receivable at December 31, 2020?
- If the estimated remaining costs to complete were $805,000, instead of $630,000, as of December 31, 2019, answer the following questions:
- How much revenue should be reported by RCL for 2019?
- How much profit (loss) should be reported by RCL for 2019?
Solutions
Expert Solution
The percentage of completion method of revenue recognition is a concept in accounting that refers to a method by which a business recognizes revenue on an ongoing basis depending on the stages of a project’s completion. In other words, the percentage of completion method is used for longer-term projects and recognizes revenue and expenses as a percentage of the project’s completion during the period.
ekkarill92 answered 2 years agoRelated Solutions
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Thrasher’s accounting year ends 31 December. Work began under the
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Construction activities are summarized below by year:
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estimated costs to complete, $630,000; progress billings during the
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2019
2020
Cost incurred during the
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$
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$
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$
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Estimated costs to complete as
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5,796,000
1,764,000
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Billings during the year
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2022
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Billings during the year
1,200,000
3,624,000
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Cash collections during the year
1,000,000
2,800,000
6,200,000
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In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
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contract to construct a road for Santa Clara County for
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the contract is as follows:
2021
2022
2023
Cost incurred during the year
$
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$
3,150,000
$
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Estimated costs to complete as of year-end
5,400,000
2,250,000
0
Billings during the year
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3,100,000
4,750,000
Cash collections during the year
1,875,000
3,100,000
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In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
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the contract is as follows:
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2022
2023
Cost incurred during the year
$
3,471,000
$
4,005,000
$
1,566,400
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5,429,000
1,424,000
0
Billings during the year
2,900,000
4,576,000
2,524,000
Cash collections during the year
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4,500,000
2,800,000
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the contract is as follows.
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0
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5,515,000
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$10,000,000. The road was completed in 2020. Information related to
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complete as of year-end 5,600,000 2,000,000 0 Billings during the
year 2,000,000 4,000,000 4,000,000 Cash collections during the year
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completed contract method...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,400,000
$
3,600,000
$
2,200,000
Estimated costs
to complete as of year-end
5,600,000
2,000,000
0
Billings during
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2,000,000
4,000,000
4,000,000
Cash collections
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4,600,000
Westgate Construction uses the completed contract method...
In 2021, the Westgate Construction company entered into a contract to construct a road for Santa...
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 2023. Information related to
the contract is as follows.
2018
2019
2020
Cost incurred during the year
$
2,044,000
$
2,628,000
$
2,890,800
Estimated costs to complete as of year-end
5,256,000
2,628,000
0
Billings during the year
2,170,000
2,502,000
5,328,000
Cash collections during the year
1,885,000
2,600,000
5,515,000
3. Complete the information required below to...
in 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
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the contract is as follows: 2018 2019 2020 Cost incurred during the
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complete as of year-end 5,256,000 2,628,000 0 Billings during the
year 2,170,000 2,502,000 5,328,000 Cash collections during the year
1,885,000 2,600,000 5,515,000 Westgate recognizes revenue over time
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