On January 1, 2020, ABC Company signed a contract to build an office to XYZ Company...
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On January 1, 2020, ABC Company signed a contract to build an office to XYZ Company for a total price of $6,000,000. The following are the estimated costs to complete Costs incurred to date Estimated cost to complete Billings to date Cash received to date 12/31/2020 1,500,000 2,500,000 2,500,000 2,400,000 12/31/2021 2,640,000 1,760,000 4,500,000 4,000,000 12/31/2022 4,600,000 0 5,500,000 5,000,000 a. Using the percentage-of-completion for the years ended December 31, 2020, 2021, and 2022. method, compute the profit or loss to be recognized b. Prepare the necessary journal entries for the Year 2020, 2021, and 2022. c. Repeat part a, assume that the Estimated cost to complete in 2021 is 4,300,000 (Instead of 1,760,000). (ONLY compute the profit or loss in 2021 and 2022) d. Repeat part a, assuming ABC uses cost-recovery method. e. Explain the reason for companies to use the Percentage-of-Completion method. On January 1, 2020, ABC Company signed a contract to build an office to XYZ Company for a total price of $6,000,000. The following are the estimated costs to complete Costs incurred to date Estimated cost to complete Billings to date Cash received to date 12/31/2020 1,500,000 2,500,000 2,500,000 2,400,000 12/31/2021 2,640,000 1,760,000 4,500,000 4,000,000 12/31/2022 4,600,000 0 5,500,000 5,000,000 a. Using the percentage-of-completion for the years ended December 31, 2020, 2021, and 2022. method, compute the profit or loss to be recognized b. Prepare the necessary journal entries for the Year 2020, 2021, and 2022. c. Repeat part a, assume that the Estimated cost to complete in 2021 is 4,300,000 (Instead of 1,760,000). (ONLY compute the profit or loss in 2021 and 2022) d. Repeat part a, assuming ABC uses cost-recovery method. e. Explain the reason for companies to use the Percentage-of-Completion method.
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Step 11 Solution Total contract price6000000 a by using percentage of completion meth... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
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