In: Accounting
General Ledger | ||||
Construction in process/progress (CIP) | ||||
Date | Description | Debit | Credit | Balance |
Mar 31, Year 1 | Cost incurred (Debited) | $ 2,940 | $ 2,940 | |
Mar 31, Year 1 | Gross profit (debited) | $ 1,260 | $ 4,200 | |
Mar 31, Year 2 | Cost incurred (Debited) | $ 16,635 | $ 20,835 | |
Mar 31, Year 2 | Gross loss (credited) | $ 3,810 | $ 17,025 | |
Mar 31, Year 3 | Cost incurred (Debited) | $ 12,000 | $ 29,025 | |
Mar 31, Year 3 | Gross profit (debited) | $ 975 | $ 30,000 | |
Mar 31, Year 3 | Project completed | $ 30,000 | $ 0 |
Calculation
Year | Year 1 | Year 2 | Year 3 |
Cost incurred during the year | $ 2,940 | $ 16,635 | $ 12,000 |
Cumulative cost incurred at end of year | $ 2,940 | $ 19,575 | $ 31,575 |
Cumulative cost incurred at end of year | $ 2,940 | $ 19,575 | $ 31,575 |
Add: Estimated costs to complete as of year-end | $ 18,060 | $ 12,000 | $ 0 |
Total estimated cost | $ 21,000 | $ 31,575 | $ 31,575 |
Percentage of completion (cumulative cost incurred at end of year / Total estimated cost) |
14.00% | 62.00% | 100.00% |
Revenue recognized till the date (30000 * percentage of completion) | $ 4,200 | $ 18,600 | $ 30,000 |
Less: Revenue recognized up to earlier year | $ 0 | $ 4,200 | $ 18,600 |
Revenue recognized in current year | $ 4,200 | $ 14,400 | $ 11,400 |
Revenue recognized in current year | $ 4,200 | $ 14,400 | $ 11,400 |
Less: cost incurred during the year | $ 2,940 | $ 16,635 | $ 12,000 |
Less: Provision For Loss of Project | $ 1,575 | ||
Add: Loss settled from Provision | $ 1,575 | ||
Gross Profit (Loss) | $ 1,260 | $ (3,810) | $ 975 |
Your Answer | |||
Year | Year 1 | Year 2 | Year 3 |
Revenue | $ 4,200 | $ 14,400 | $ 11,400 |
Gross Profit (Loss) | $ 1,260 | $ (3,810) | $ 975 |
Hint: | |||
Provision For Loss of Project, When Estimated Project cost is more than Contract Price then Difference between them Provision should be made. And for future Amount of provision should be used for write of loss. For Year 2, Provision = estimated cost less Contract revenue = 31575-30000 = 1575 |