1. 14 marks Contract price $ 3,140,000 Total estimated construction cost at contract inception $ 2,305,000...

1. 14 marks Contract price $ 3,140,000 Total estimated construction cost at contract inception $ 2,305,000 2020 2021 2022 Total costs incurred to date $ 691,500 $ 1,540,500 $ 2,350,000 Estimated costs to complete $ 1,613,500 $ 829,500 $ - Customer billings to date $ 625,000 $ 2,175,000 $ 3,140,000 Collections to date $ 600,000 $ 1,790,000 $ 2,899,000 Required: 1. Calculate the gross profit that should be recognized for 2020, 2021, and 2022, using the percentage of completion method. 2. Prepare the journal entries required for the 2021 year assuming that the percentage of completion method is used. 3. Determine the gross profit to be recognized for 2020, 2021, and 2022, using the completed contract method. On February 1, 2020, Kenora Contractors agreed to construct a building. The project was scheduled to be finished in 2022. Information relating to the costs and billings for this contract is as follows:

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Expert Solution

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. Computation of Gross profit recognized in different years will be as follows:

2. Journal Entries for the Year 2021 will be as follows:

3. The completed contract method postpones the reporting of income and expenses, till a contract is completed. Hence, all the profit of the contract will be recognized in the year in which it is completed i.e. 2022.

ekkarill92 answered 1 year ago

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