During 2014, Darwin Corporation started a construction job with a contract price of S4.2 million. Darwin ran
Question:
Instructions
Under the earnings approach:
(a) Calculate the amount of gross profit that should be recognized each year under the percentage-of-completion method.
(b) Prepare the journal entries for 2015 to recognize the revenue from the contract, assuming the percentage-of-completion method is used. Explain the treatment of losses under the earnings approach for percentage-of-completion.
(c) Calculate the amount of gross profit or loss that should be recognized each year under the completed-contract method. Explain the treatment of losses under the earnings approach for completed-contract.
(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.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,