Construction Accounting
Tuscany Boat builders was recently awarded a $17,000,000 contract to construct a luxury liner for Queen Cruise liners Inc. Tuscany estimates it will take 42 months to complete the contract. The company uses the cost to cost method to estimate profits. The following information details the actual and estimated costs for the years 2007–2010.
|
|
Actual Cost— |
Estimated Cost |
|
Year |
Current Year |
to Complete |
|
2007 |
$6,400,000 |
$8,700,000 |
|
2008 |
5,200,000 |
4,600,000 |
|
2009 |
4,100,000 |
1,500,000 |
|
2010 |
1,000,000 |
0 |
Instructions:
1. Compute the revenue, cost, and gross profit to be recognized for each of the years 2007–2010 under the percentage of completion method.
2. Give the journal entries for each of the years 2007–2010 to record the information from (1).