Construction Accounting
The Rushing Construction Company obtained a construction contract to build a highway and bridge over the Snake River. It was estimated at the beginning of the contract that it would take three years to complete the project at an expected cost of $50,000,000. The contract price was $60,000,000. The project actually took four years, being accepted as completed late in 2009. The following information describes the status of the job at the close of production each year.
|
|
2006 |
2007 |
2008 |
2009 |
2010 |
|
Actual cost incurred |
$12,000,000 |
$18,160,000 |
$14,840,000 |
$10,000,000 |
$ 0 |
|
Estimated cost to complete |
38,000,000 |
27,840,000 |
10,555,555 |
0 |
0 |
|
Collections on contract |
12,000,000 |
13,500,000 |
15,000,000 |
15,000,000 |
4,500,000 |
|
Billings on contract |
13,000,000 |
15,500,000 |
17,000,000 |
14,500,000 |
0 |
Instructions:
1. What is the revenue, cost, and gross profit recognized for each of the years 2006–2010 under (a) the percentage of completion method and (b) the completed contract method?
2. Give the journal entries for each year assuming that the percentage of completion method is used.