Question

Unique Construction Inc. entered into a firm fixed-price contract with A-One Clinic on July 1, 2014, to construct a multi-storey medical office. At that time, Unique Construction estimated that it would take between two and three years to complete the project. The total contract price is $5.5 million. Unique Construction chooses appropriately to account for this contract under the completed-contract method in its financial statements and for income tax Reporting. The building was deemed substantially completed on December 31, 2016.
The estimated percentage of completion, accumulated contract costs incurred, estimated costs co complete me contract, and accumulated billings co the clinic under me contract were as follows:
Instructions
Under the earnings approach:
(a) Prepare schedules co calculate me amount to be shown as "cost of uncompleted contract in excess of related billings" or "billings on uncompleted contract in excess of related costs" at December 31, 2014, 2015, and 2016. Ignore income taxes. Show supporting calculations in good form.
(b) Prepare schedules to calculate the profit or loss that should be recognized from this contract for me years ended December 31, 2014, 2015, and 2016. Ignore income taxes. Show supporting calculations in good form.
(c) Assume a construction company had all of the information that it required co use me percentage-of-completion method for construction contracts. Why would this company want to account for contracts using me completed contract method?


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  • CreatedSeptember 18, 2015
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