Percentage of Completion Using Architect’s Estimates
Central Iowa Builders Inc. entered into a contract to construct an office building and plaza at a contract price of $10,000,000. Income is to be reported using the percentage of completion method as determined by estimates made by the architect. The data below summarize the activities on the construction for the years 2007–2009. For the years 2007–2009, what entries are required to record this information, assuming the architect’s estimate of the percentage completed is used to determine revenue (proportional cost approach)?
|
|
Actual Cost |
Estimated Cost |
Percentage Completed— |
Project |
Collections |
|
Year |
Incurred |
to Complete |
Architect’s Estimate |
Billings |
on Billings |
|
2007 |
$3,200,000 |
$6,000,000 |
25% |
$3,300,000 |
$3,100,000 |
|
2008 |
4,300,000 |
1,600,000 |
75 |
4,500,000 |
2,700,000 |
|
2009 |
1,550,000 |
0 |
100 |
2,200,000 |
4,200,000 |