Garnet Construction Co. contracted to build a bridge for $900,000. Construction

Question

Garnet Construction Co. contracted to build a bridge for $900,000. Construction began in 2010 and was completed in 2012. Data relating to the construction are: 2010 2011 2012 Costs to date $270,000 $450,000 $610,000 Estimated costs to complete 330,000 150,000 0 Progress billings to date 270,000 550,000 900,000 Cash collected to date 240,000 500,000 900,000 Garnet uses the percentage-of-completion method. (a) How much profit or loss should be reported for 2010 and 2011? Show your computation, including revenue and expenses. 2010: 2011: (b) Make the entry to record the revenue and gross profit for 2011. (c) Show the ending balance of accounts receivable and inventory related to the long-term construction as of Dec. 31, 2011. (d) Assume that estimated cost to complete incurred at 2011 will be $500,000 instead of $150,000. How much gross profit or loss should be reported for 2011? Show your computation.

Explanation / Answer

2010 2011 2012 Cost incurred    270,000    180,000    160,000 Estimated cost to complete    330,000    150,000               -   Amt Billed    270,000    550,000    900,000 amt collected    240,000    500,000    900,000 Total gross profit on the contract: Billing    900,000 Total cost    610,000 Profit    290,000 Per centage completed 56% 94%                 0 (cost/esti cost) Profit to be booked    163,125    108,750 Journal Debit Credit Work-in-progress    180,000 Accounts payable and others    180,000 Accounts receivable    550,000 Billings    550,000 Cash    500,000 Account receivable    500,000 Construction in Process    108,750 Construction Expenses    180,000 Construction Revenues    288,750 AR balance      80,000 (total billed-collected as on date) d) 2010 2011 2012 Cost incurred    270,000    180,000    160,000 Estimated cost to complete    330,000    500,000               -   Amt Billed    270,000    550,000    900,000 amt collected    240,000    500,000    900,000 Total gross profit on the contract: Billing    900,000 Total cost    610,000 Profit    290,000 Per centage completed 33% 54%                 0 (cost/esti cost) Profit to be booked      94,337      62,892

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.