Edwards Company contracted on 4/1/14 to construct a building for $2,400,000. The
ID: 2483089 • Letter: E
Question
Edwards Company contracted on 4/1/14 to construct a building for $2,400,000. The project was completed in 2016. Additional data follow: 2014 2015 2016 Costs incurred to date $ 560,000 $1,350,000 $1,900,000 Estimated cost to complete 1,040,000 450,000 — Billingsto date 500,000 1,900,000 2,400,000 Collections to date 400,000 1,300,000 2,200,000 Instructions (a) Calculate the income recognized by Edwards under the percentage-of-completion method of accounting in each of the years 2014, 2015, and 2016. (b) Prepare all necessary entries for the year 2015. (c) Present the balance sheet disclosures at December 31, 2015. Proper headings or subheadings must be indicated.Explanation / Answer
Edward Company Income Statement Under the percentage of completion method 2014 2015 2016 Total Revenue 840,000 960,000 600,000 2,400,000 Construction Costs 560,000 790,000 550,000 1,900,000 Net Income 280,000 170,000 50,000 500,000 Estimated Revenues 2014 2015 2016 Costs 560,000 1,350,000 1,900,000 Estimated Cost to Complete 1,040,000 450,000 0 Total Cost 1,600,000 1,800,000 1,900,000 Revenue Recognised 840,000 960,000 600,000 (560,000/1,600,000) X 2,400,000 [(1,350,000 / 1,800,000) X 2,400,000] - 840,000 2,400,000 - 840,000 - 960,000 Journal Entry Date Particulars Dr. Amt Cr. Amt. 1 Construction in process Dr. 790,000 To Cash 790,000 2 Accounts Receivables Dr. 1,400,000 To Billings on Construction in Process 1,400,000 3 Cash Dr. 900,000 To Accounts Receivables 900,000 4 Construction Expenses Dr. 790,000 Construction in Process Dr. 170,000 To Revenue from Long Term Contracts 960,000 Answer 3. Current Assets Accounts Receivables 600,000 Current Liabilities Billings (1,900,000) in Excess of Costs & Recognized profits ($1,800,000) 100,000
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