(a) Problem 133 (Part Level Submission) Warning Don\'t show me this message agai
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Problem 133 (Part Level Submission)
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Problem 133 (Part Level Submission)
The board of directors of Ogle Construction Company is meeting to choose between the completed-contract method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Ogle's controller in the preparation of a presentation to be given at the board meeting. The controller provides you with the following information:1. Ogle commenced doing business on January 1, 2015. 2. Construction activities for the year ended December 31, 2015, were as follows: Project Total Contract
Price Billings Through
12/31/15 Cash Collections
Through 12/31/15 Contract Costs
Incurred Through
12/31/15 Estimated
Additional Costs to
Complete Contracts A $ 497,000 $ 337,000 $ 307,000 $ 421,000 $ 98,000 B 717,000 207,000 207,000 190,500 444,500 C 473,500 472,000 387,000 347,000 -0- D 198,500 97,000 63,500 120,000 94,000 E 447,000 397,000 397,000 317,000 79,250 $2,333,000 $1,510,000 $1,361,500 $1,395,500 $715,750 3. Each contract is with a different customer. 4. Any work remaining to be done on the contracts is expected to be completed in 2016.
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Compute the amount of income (or loss) before selling, general, and administrative expenses for the year ended December 31, 2015, which would be reported under:(1) The completed-contract method. $ (2) The percentage-of-completion method (based on estimated costs). $ Compute the amount of income (or loss) before selling, general, and administrative expenses for the year ended December 31, 2015, which would be reported under: (1) The completed-contract method. $ (2) The percentage-of-completion method (based on estimated costs). $
Explanation / Answer
(1) Completed contract method
Percentage completion Method
Percentage Completed = Cost incurred/Total Estimated cost
Revenue to be recognised = Total contract price x Percentage completion - cost incurred
Project Billings Cost incurred Profit/(loss) A 337000 421000 (84000) B 207000 190500 16500 C 472000 347000 125000 D 97000 120000 (23000) E 397000 317000 80000Related Questions
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