Reference no: EM132702513

Question - DMG Developer's Inc. was contracted to construct a building for $995,000. The customer owns the building throughout the contract period. The contract provides for progress payments. Work for the contract started on 30 April 2017, and was completed on 30 September 2019. DMG's accounting year end is 31 December. Construction activities are summarized below by year:

2017 - Construction costs incurred during the year, $183,600; estimated costs to complete, $642,600; progress billings during the year, $156,000; and collections, $142,800.

2018 - Construction costs incurred during the year, $459,000; estimated costs to complete, $193,800; progress billing during the year, $390,100; and collections, $387,600.

2019 - Construction costs incurred during the year, $199,000. Because the contract was completed, the remaining balance was billed and later collected in full per the contract.

Required -

1. Provide DMG's journal entries to record these events. Assume that percentage of completion is measured by the ratio of costs incurred to date divided by total estimated construction costs.

2. Provide the balances that would be shown on the SCI and SFP for this contract for each year.

3. Now assume that DMG Developers owns the building throughout the construction period and title is transferred to the customer only once the building is fully constructed. Prepare the journal entries required to record the events from 2017 to 2019. Also calculate the balances that would be shown on the SCI and SFP for this contract for each year.