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 |
PART A: Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.
Answer:
|
Gross profit recognized in 2012: $458180
Gross profit recognized in 2013: $591910
Gross profit recognized in 2014: $395910
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PART B:
Prepare all necessary journal entries for 2014.
Entry 1: (To record cost of Construction)
Entry 2: (To record progress Billings)
Entry 3: (To record Collections)
Entry 4: (To recognize Revenue)
Entry 5: (To record completion of the contract