Question - Construction Accounting
The Rushing Construction Company obtained a construction ontract to build a highway and bridge over the Snake River It was estimated at the biginning of the contract that it would take three years to complete the project at an expected cost of $50,000,000. The contract price was $60,000,000. The project acutally took four years, being accepted as completed late in 2014. The following information describes the status of the job at the close of the production each year.
2011 2012 2013 2014 2015
Actual cost incurred 12,000,000 18,160,000 14,840,000 10,000,000 0
Estimated cost to complete 38,000,000 27,840,000 10,555,555 0 0
Collections on contract 12,000,000 13,500,000 15,000,000 15,000,000 4,500,000
Billings on contract 13,000,000 15,500,000 17,000,000 14,500,000 0
Instructions -
1. What is the revenue, cost, and gross profit recognized for each of the years 2011-2015 under (a) the percentage of completion method and (b) the completed contract method?
2. Give the journal entries for each year assuming that the percentage of completion method is used. (Note: round percentage to nearest whole percent for percentage completed)