Part a compute the amount of gross profit to be recognized

Reference no: EM13568988

On March 1, 2012, Chance Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,016,000 and will take 3 years to complete. The contract price was $3,494,000. The following information pertains to the construction period.

	2012	2013	2014
Costs to date	$624,960	$1,430,650	$2,048,000
Estimated costs to complete	1,391,040	584,350	-0-
Progress billings to date	892,000	1,805,000	3,494,000
Cash collected to date	842,000	1,678,000	3,345,000

PART A: Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Answer:

Gross profit recognized in 2012: $458180
Gross profit recognized in 2013: $591910

Gross profit recognized in 2014: $395910

PART B:

Prepare all necessary journal entries for 2014.

Entry 1: (To record cost of Construction)

Entry 2: (To record progress Billings)

Entry 3: (To record Collections)

Entry 4: (To recognize Revenue)

Entry 5: (To record completion of the contract

Reference no: EM13568988

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