In 2012, Zeus Construction Company agreed to construct an apartment building at a price of $1,200,000. The information related to the billing for this contract is shown below:
|
|
2012
|
2013
|
2014
|
|
Costs incurred to date (cumulative costs)
|
$480,000
|
$800,000
|
$1,250,000
|
|
Estimated costs to complete
|
520,000
|
450,000
|
0
|
|
Billings to date (cumulative billings)
|
150,000
|
500,000
|
1,200,000
|
|
Collections to date (cumulative collections)
|
120,000
|
320,000
|
940,000
|
A) Record journal entries for 2013.
B) Determine gross profit to be recognized in each year if the company uses:
|
|
Percentage of Completion
|
Completed Contract
|
|
2012 Gross Profit
|
|
|
|
2013 Gross Profit
|
|
|
|
2014 Gross Profit
|
|
|
C) Determine the whether Zeus will report a liability or asset in relation to its construction project as well as accounts receivable balances (remember to express values net of any related contra accounts):
|
|
Asset (Liability) Balance of Construction Project
|
Accounts Receivable
|
|
12/31/12
|
|
|
|
12/31/13
|
|
|
|
12/31/14
|
|
|