On February 1, 2020, Mar Contractors agreed to construct a building at a contract price of $15,400,000. Mar initially estimated total construction costs would be $12,000,000 and the project would be finished in 2023. Information relating to the costs and billings for this contract during 2020-2022 is as follows: 2020 2021 2022 Total costs incurred during the year 4,500,000 5,300,000 4,000,000 Estimated costs to complete 7,500,000 4,200,000 1,800,000 Customer billings to date 6,600,000 12,000,000 13,800,000 Collections to date 6,000,000 10,500,000 13,500,000 Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract and all the necessary journal entries for the years ended December 31, 2020, 2021, and 2022. Using the cost-recovery method, prepare schedules to compute the profit or loss to be recognized as a result of this contract all the necessary journal entries to record the costs, expenses and revenue for the years ended December 31, 2020, 2021, and 2022. (Journal entries for billings and collection are not required.)

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 25E: Koolman Construction Company began work on a contract in 2019. The contract price is 3,000,000, and...

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On February 1, 2020, Mar Contractors agreed to construct a building at a contract price of $15,400,000. Mar initially estimated total construction costs would be $12,000,000 and the project would be finished in 2023. Information relating to the costs and billings for this contract during 2020-2022 is as follows:

2020 2021 2022

Total costs incurred during the year 4,500,000 5,300,000 4,000,000

Estimated costs to complete 7,500,000 4,200,000 1,800,000

Customer billings to date 6,600,000 12,000,000 13,800,000

Collections to date 6,000,000 10,500,000 13,500,000

Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract and all the necessary journal entries for the years ended December 31, 2020, 2021, and 2022.
Using the cost-recovery method, prepare schedules to compute the profit or loss to be recognized as a result of this contract all the necessary journal entries to record the costs, expenses and revenue for the years ended December 31, 2020, 2021, and 2022. (Journal entries for billings and collection are not required.)

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