During 2020, Darwin Corporation started a construction job with a contract price of $4.2 million. Darwin ran
Question:
During 2020, Darwin Corporation started a construction job with a contract price of $4.2 million. Darwin ran into severe technical difficulties during construction but managed to complete the job in 2022. The contract is non-cancellable. Under the terms of the contract, Darwin sends billings as revenues are earned. Billings are non refundable. The following information is available:
a. Calculate the amount of gross profit that should be recognized each year under the percentageof- completion method.
b. Prepare the year-end journal entries for 2021 to record revenues and expenses from the contract, assuming the percentage-of-completion method is used. Explain the treatment of the reduction in overall gross profit under the percentage-of-completion method.
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 completed-contract method.
CorporationA 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...
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Intermediate Accounting Volume 1
ISBN: 978-1119496496
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy