Jorge Construction has been contracted to build an office building for $8,500,000. Construction began on March 11, 2015 and was completed on November 3, 2016. The percent complete is measured by the ratio of costs incurred to total estimated construction costs. Jorge has a December 31 year end. Data on contract costs, progress billings, and progress collections for the construction contract were as follows: 

2015 2016 $6,500,000 Costs incurred to date Estimated construction costs to complete Progress billings to date Progress collections to date $2,500,000 $3,750,000 $2,300,000 $1,900,000 $8,500,000 $8,250,000 

Required: 

a. Record the journal entries for 2015 and 2016, assuming Jorge Construction uses the percentage of completion method. 

b. Determine the following financial statement account balances at December 31, 2015, assuming Jorge Construction uses the percentage-of-completion method. 

i) Accounts receivable 

ii) Contract Asset (Liability) 

iii) Revenue from long-term contracts (for the year 2015) 

Part B - 6 Marks Take the information from Part A and assume Jorge uses the zero-profit method. 

Required: 

i. Compute the following: Contract Asset (Liability) as at December 31, 2016 

ii. Gross profit for 2015 

iii. Gross profit for 2016.

Answer rating: 100% (QA)

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