In: Accounting
In 2015 The Big Boss Construction Company, started a 3
year
project at a fixed contract price of $22,000,000. The
estimated
construction costs were $15,500,000. The project was
completed
on time during the 2917 year. The following information is
available for the three year period of the construction
project.
2015 2016 2017
Costs Incurred to Date $6,188,000 $12,360,000 $15,875,000
Estimated Costs to Complete 9,282,000 3,090,000 --
Billings to Date 6,400,000 18,890,000 22,000,000
Collections to Date 5,100,000 17,110,000 21,630,000
Required
1. Compute the amount of gross profit to be recognized for
each of the three years using the percentage of completion.
2. Prepare all necessary journal entries for the 2015, 2016,
and
2017 years using the percentage of completion method.
3. Compute gross profit to be recognized for the three years
of
2015, 2016, and 2017 using the completed contract method.
4. For each of the three years of 2015, 2016, and 2017:
a. Prepare the Income Statement section for Big Boss
Construction
reporting percentage of completion information.
b. Prepare the Balance Sheet section for Big Boss
Constriction
reporting percentage of completion information.
Particulars |
Year 2015(FIG IN $) |
Year 2016(FIG IN $) |
Year 2017(FIG IN $) |
|||
Contract Price |
22000000 |
22000000 |
22000000 |
|||
Cost incurred To date |
6188000 |
12360000 |
15875000 |
|||
Add:estimated Cost to complete |
9282000 |
15470000 |
3090000 |
15450000 |
- |
15875000 |
Total Estimated Profit |
6530,000 |
65,50,000 |
61,25,000 |
|||
Percentage completed Till date |
40% |
80% |
100% |
|||
Total Gross Profit Recognized |
26,12,000 |
52,40,000 |
61,25,000 |
|||
2.
Journal entries under percentage of completion method
Particulars |
Debit($) |
Credit( $) |
Debit($) |
Credit($) |
Debit($) |
Credit($) |
|
Cost incurred to Date |
Construction in Progress(CIP) |
6188000 |
12360000 |
15875000 |
|||
Accounts payable |
6188000 |
12360000 |
15875000 |
||||
Billing to date |
Accounts Receivable |
6400000 |
18890000 |
22000000 |
|||
Billing on CIP |
6400000 |
18890000 |
22000000 |
||||
Receiving Payament |
Cash |
5100000 |
17110000 |
21630000 |
|||
Accounts Receivable |
5100000 |
17110000 |
21630000 |
||||
Recording Revenue |
Billing on CIP |
6400000 |
18890000 |
22000000 |
|||
Construction revenue a/c |
6400000 |
18890000 |
22000000 |
||||
Recording Expenses |
Cost of construction |
6188000 |
12360000 |
15875000 |
|||
Construction in progress(CIP)
|
6188000 |
12360000 |
15875000 |
3.Recognition of Gross Profit under the completion contract method
Particulars |
Year 2015(fig in$) |
Year 2016(fig in $) |
Year 2017(fig in $) |
|||
Contract Price |
22000000 |
22000000 |
22000000 |
|||
Cost incurred To date |
6188000 |
12360000 |
15875000 |
|||
Add:estimated Cost to complete |
9282000 |
15470000 |
3090000 |
15450000 |
- |
15875000 |
Total Estimated Profit |
6530,000 |
65,50,000 |
61,25,000 |
|||
Percentage completed Till date |
40% |
80% |
100% |
|||
Total Gross Profit Recognized |
Not applicable |
Not applicable |
61,25,000 |
|||
4. a) INCOME STATEMENT SECTION
Particulars |
Year 2015(fig in$) |
Year 2016(fig in$) |
Year 2017(fig in$) |
Sales |
8800000 |
17600000 |
22000000 |
Less : Cost of goods sold |
6188000 |
12360000 |
15875000 |
Gross profit |
2612000 |
5240,000 |
61,25,000 |
b. BALANCE SHEET":
Current liabilities
CIP
lESS: bILLINGS ON
construction