Question
In: Accounting
On February 1, 2020, a company agreed to construct a building at a contract price of...
On February 1, 2020, a company agreed to construct a building
at a contract price of $42,000. The company estimated the project
would be finished in 2022. Information relating to the costs and
billings for this contract is as follows:
2020 2021 2022
Total costs incurred to date $8,000 $10,000 $22,000
Estimated costs to complete 12,000 6,000 -0-
Customer billings to date 9,000 21,000 29,000
Collections to date 4,000 14,000 25,000
If the company uses the percentage-of-completion method, an
inventory/current liability of $___________should be shown on the
balance sheet at December 31, 2021 related to the project.
Solutions
Expert Solution
| Contract Price | $42,000 | |||||||||||||||
| A | B | C=A+B | D=(A/C)*100% | E=D*42000 | ||||||||||||
| End of Year | Cost Incurred during the Year | Actual Cost to date | Estimated further cost | Total Estimated Cost | Percentage Completion | Cumulative Recognized Revenue | Recognized during the year | |||||||||
| 2020 | $8,000 | $8,000 | $12,000 | $20,000 | 40.0% | $16,800 | $16,800 | |||||||||
| 2021 | $2,000 | $10,000 | $6,000 | $16,000 | 62.5% | $26,250 | $9,450 | |||||||||
| 2022 | $12,000 | $22,000 | $0 | $22,000 | 100.0% | $42,000 | $15,750 | |||||||||
| Year | ConstructionRevenue | Construction Expense | Gross Profit/(Loss) | |||||||||||||
| 2020 | $16,800 | $8,000 | $8,800 | |||||||||||||
| 2021 | $9,450 | $2,000 | $7,450 | |||||||||||||
| 2022 | $15,750 | $12,000 | $3,750 | |||||||||||||
| As on December 31,2021 | ||||||||||||||||
| Cumulative expenses | $10,000 | |||||||||||||||
| Cumulative Revenue | $26,250 | |||||||||||||||
| Billing to date | $21,000 | |||||||||||||||
| Collection to date | $14,000 | |||||||||||||||
| Accounts | Debit | Credit | ||||||||||||||
| Construction in progress | $16,250 | |||||||||||||||
| Construction Expense | $10,000 | |||||||||||||||
| Construction Revenue | $26,250 | |||||||||||||||
| Accounts Receivable | $21,000 | |||||||||||||||
| Billing on construction contract | $21,000 | |||||||||||||||
| Cash | $14,000 | |||||||||||||||
| Accounts Receivable | $14,000 | |||||||||||||||
| If the company uses the percentage-of-completion method, an inventoryof $16,250 should be shown on the balance sheet at December 31, 2021 related to the project. | ||||||||||||||||
 ekkarill92 answered 10 months agoRelated SolutionsOn February 1, 2020, a company agreed to construct a building at a contract price of...On February 1, 2020, a company agreed to construct a building at
a contract price of $35,000. The company estimated the project
would be finished in 2022. Information relating to the costs and
billings for this contract is as follows:
2020 2021 2022
Total costs incurred to
date $8,000 $10,000 $22,000
Estimated costs to
complete 12,000 6,000 -0-
Customer billings to
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Collections to
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