During 2014, Antoinette started a construction job with a contract price of $2.5 million. The job was completed in 2016 and information for the three years of construction is as follows:

Instructions
Under the earning approach:
(a) Calculate the amount of gross profit that should be recognized each year under the percentage-of-completion method. Round the percentage complete to two decimal places.
(b) Prepare all necessary journal entries for 2014, 2015, and 2016, including closing the contract accounts upon completion of the contract, assuming the percentage-of-completion method is used.
(c) Calculate the amount of gross profit that should be recognized each year under the completed-contract method.
(d) Prepare the necessary journal entry in 2016 to close the contract accounts and to recognize the revenues and costs upon completion, assuming the completed-contract method is used.
(e) Assume that Antoinette cannot reliably measure the outcome of the contract. Explain how this transaction would be accounted for:
1. If Antoinette is reporting under current IFRS (IAS 11 and 18).
2. If Antoinette is reporting under ASPE.

Transcribed Image Text:

Costs incurred to date Estimated costs to complete Billings to date Collections to date 2014 $1,050,000 850,000 1,000,000 770,000 2015 $1,555,000 175,000 1,900,000 1,810,000 2016 $1,785,000 2,500,000 2,500,000