Provide the journal entries for assuming stage of completion

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Reference no: EM132613020

Construction Contract

Fexco Construction Company signs a contract on 1 July 2018, agreeing to build a warehouse for ABC Corporation Limited at a contract price of $12 million. Fexco Construction Company estimates that construction costs will be as follows:

2018 $2.5 million

2019 $4.0 million

2020 $2.5 million

The contract provides that ABC Corporation Limited will make payments on 31 December each year as follows:

$2018 $3.5 million

$2019 $4.5 million

$2020 $4.0 million

The contract is completed and accepted on 31 December 2020. Assume that actual costs and cash collections coincide with expectations.

Fexco Construction Company has a financial year ending 31 December.

Required

Problem 1: Provide the journal entries for 2018, 2019 and 2020, assuming that:

(a) The stage of completion can be reliably estimated; and

(b) The stage of completion cannot be reliably estimated.

Reference no: EM132613020

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