In January 2024, Burrard Shipyards Ltd. (BSL) was awarded a $42-million contract to construct a non-combat hospital

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In January 2024, Burrard Shipyards Ltd. (“BSL”) was awarded a $42-million contract to construct a non-combat hospital ship for the Royal Canadian Navy. The contract was part of the federal government’s program to refit the Royal Canadian Navy and enable it to play a greater role in peace-keeping and humanitarian missions. BSL estimated that it would take three years to take the project from planning through to completion. The company has a December 31 year end and uses the percentage-of-completion method, with completion measured as the ratio of costs incurred to date to the total estimated construction costs. As the ship was being constructed to meet the unique specifications of the Royal Canadian Navy, BSL had no alternative use for it. BSL’s contract provides it with an enforceable right to payment for its performance to date, including a reasonable profit margin, in the event of contract cancellation. BSL had the following information available in relation to this construction contract:


Required 

a. Determine the percentage of completion, revenue, and gross profit to be recognized for each year of the contract. 

b. Prepare all necessary journal entries for each year of the contract.

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Related Book For  book-img-for-question

Understanding Financial Accounting

ISBN: 9781119715474

3rd Canadian Edition

Authors: Christopher D. Burnley

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