In 2019, DJ Builders Construction agreed to construct an apartment building at a price of P2,000,000. The information relating to the costs and billings for the contract is as follows: 2019 Direct and allocable costs to date.. Estimated costs yet to be incurred. Customer billings each year......... Collection of billings each year. ...P 560,000 P 1,040,000 ..750,000 .560,000 2020 1,200,000 400,000 560,000 640,000 2021 P1,570,000 -0- 730,000 840,000 During 2020 the customer agrees to a variation with increases expected revenue from the contract by P40,000 and causes additional costs of P20,000. At the end of 2020 there are materials stored on site for use in 2021 which cost P16,000 during the period. Required: A. Prepare journal entries each year using: 1. Percentage-of-completion method/Over Time 2. Cost recovery method of construction accounting (Hybrid Method or Zero-profit Approach).

In 2019, DJ Builders Construction agreed to construct an apartment building at a price of P2,000,000. The information relating to the costs and billings for the contract is as follows: 2019 Direct and allocable costs to date.. Estimated costs yet to be incurred. Customer billings each year......... Collection of billings each year. ...P 560,000 P 1,040,000 ..750,000 .560,000 2020 1,200,000 400,000 560,000 640,000 2021 P1,570,000 -0- 730,000 840,000 During 2020 the customer agrees to a variation with increases expected revenue from the contract by P40,000 and causes additional costs of P20,000. At the end of 2020 there are materials stored on site for use in 2021 which cost P16,000 during the period. Required: A. Prepare journal entries each year using: 1. Percentage-of-completion method/Over Time 2. Cost recovery method of construction accounting (Hybrid Method or Zero-profit Approach).

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6P

See similar textbooks

Similar questions

On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Koolman Construction Company began work on a contract in 2019. The contract price is 3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows: Required: 1. Compute the gross profit or loss recognized in 2019 and 2020. 2. Prepare the appropriate sections of the income statement and ending balance sheet for each year.
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of 3,200. The contract does not include any stipulations for additional periods. On June 1, Grahams WeedFeed and BigData sign a new 12-month contract that is retroactive to April 1, 2020. The monthly fee for the new contract is 4,000 per month and is also retroactive to April 1, 2020. During April and May of 2020, while the new contract was being negotiated, Grahams Weed Feed continued to maintain the grounds, and BigData continued to pay 3,200 per month. BigData was satisfied with Grahams WeedFeeds performance, and the only issue during negotiations was the monthly fee. Required: Determine if a valid contract exists between Grahams WeedFeed and BigData during April and May 2020.