Reference no: EM133114159
Question 1 - Fineconstruct Corp. entered into a $6 million fixed-price contract in 2015 to construct an office tower. Fineconstruct has determined that the performance obligation is satisfied over time. Due to unforeseen events, the company is not able to reasonably estimate the outcome of the performance obligation at its 2015 year end.
It believes, though, that all costs incurred in satisfying the performance obligation will be recoverable.
Details of the contract are as follows
Contract price $6,000
Contract costs - incurred to date 1,430
Contract costs - estimated to complete Unknown
Progress billings invoiced 1,500
Progress billings received 1,300
Required - Prepare summary journal entries to record the above transactions for Fineconstruct's 2015 fiscal year end.
Question 2 - Ace Construction Corp. (ACC) entered into a $2 million contract to construct a warehouse. Management determined that the contract represents a single performance obligation satisfied over time. ACC started work on the project in 2016 and completed work in 2018. ACC uses an input cost method - the cost-to-cost approach - to determine the stage of completion. Its fiscal year end is December 31.
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2016
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2017
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2018
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Cumulative costs incurred
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$300
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$1,100
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$1,500
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|
Estimated costs to complete
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1,400
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650
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0
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|
Progress billing during the year
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350
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1,200
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450
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|
Collections during the year
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275
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1,225
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500
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Required - Prepare all required summary journal entries for each of the 2016, 2017 and 2018 fiscal years.
Illustrate how these amounts would be reported on the December 31, 2016, statement of financial position of ACC.