On March 1, 2012, Chance Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,016,000 and will take 3 years to complete. The contract price was $3,494,000. The following information pertains to the construction period.
|
|
2012
|
|
2013
|
|
2014
|
| Costs to date |
|
$624,960 |
|
$1,430,650 |
|
$2,048,000 |
| Estimated costs to complete |
|
1,391,040 |
|
584,350 |
|
-0- |
| Progress billings to date |
|
892,000 |
|
1,805,000 |
|
3,494,000 |
| Cash collected to date |
|
842,000 |
|
1,678,000 |
|
3,345,000 |
A. Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.
| Gross profit recognized in 2012----- |
|
$458180
|
| Gross profit recognized in 2013 |
|
$591910
|
| Gross profit recognized in 2014 |
|
$395910
|
B. Prepare all necessary journal entries for 2014
Account Titles and Explanation
Debit
Credit
1. ________________ _______ _______
(to record cost of constructino)
2. _______________ _______ ________
(to record progress billings)
3. ________________ ________ _________
(to record collections)
4. ________________ _________ _________
(to recognize revenue)
5. ________________ __________ _________
(To record completion of contract)