Multiple Years of Revenues and Costs: Cost to Cost Method
The company signed a $1,200,000 contract to build an environmentally friendly access trail to Deseret Peak. The project was expected to take approximately 3 years. The following information was collected for each year of the project, Year 1, Year 2, and Year 3:
|
|
Cost |
Expected |
Trail Feet |
Additional |
|
|
Expended |
Additional |
Constructed |
Trail Feet |
|
|
during |
Cost to |
during |
to Be |
|
|
the Year |
Completion |
the Year |
Constructed |
|
Year 1 |
$200,000 |
$550,000 |
8,000 |
16,200 |
|
Year 2 |
350,000 |
280,000 |
12,500 |
4,100 |
|
Year 3 |
250,000 |
0 |
4,000 |
0 |
The company uses the percentage of completion method of computing revenue from long term construction contracts. Assume that the company employs the cost to cost method of estimating the percentage of completion. Make the journal entries to record revenue and cost for the construction project—(1) Year 1, (2) Year 2, and (3) Year 3.