AccountingPina Construction Company uses thepercentage-of-completion method ofaccounting. In 2020, Pina began work undercontract #E2-D2, which provided for a contractprice of $2,158,000. Other details follow:20202021Costs incurred$648,400$1,429,000during the yearEstimated coststo complete, asof December 31972,600-0-Billings duringthe year426,0002,158,000Collectionsduring the year343,0001,513,000(a)What portion of the total contract price wouldbe recognized as revenue in 2020? In 2021?Revenue recognized in 2020Revenue recognized in 2021b) Assuming the same facts as those aboveexcept that Hamilton uses the completed-contract method of accounting, what portion ofthe total contract price would be recognized asrevenue in 2021?Revenue recognized in 2021:(c) Prepare a complete set of journal entries for2020 (using the percentage-of-completionmethod).

Using percentage of completion method, the revenue is recognized on the basis of percentage of work…

Answered: What portion of the total contract…

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 24E

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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 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?
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.

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