Stoney Construction Co. enters a 3-year contract to build a new warehouse facility. Stoney follows Completed Contract
Question:
Stoney Construction Co. enters a 3-year contract to build a new warehouse facility. Stoney follows Completed Contract Method under U.S. GAAP and adopts “progress billing” accounting for its construction project. Information for Years 1, 2, and 3 is shown below:
Year 1 | Year 2 | Year 3 | |
Sales price | $ 2,800,000 | $ 2,800,000 | $ 2,800,000 |
Estimated costs | $ 1,600,000 | $ 2,000,000 | $ 2,000,000 |
Costs incurred to date (paid in cash) | $ 400,000 | $ 900,000 | $ 2,000,000 |
Billed to date | $ 250,000 | $ 1,150,000 | $ 2,800,000 |
Received in cash to date | $ 190,000 | $ 950,000 | $ 2,800,000 |
How will the construction project be shown on the balance sheet at the end of Year 1?
a. Please show your calculation of the balance of the project.
b. Which section the balance belongs to? Please choose from the follows
i. Assets ii.Liabilities iii Equity iv. Revenue v. Expense
What is the gross profit recognized in Year 3? (Show work)
b. What is the final journal entry for Year 3, assuming all the amounts as originally stated? Please select account names from accounts provided in Appendix. Please indicate the element of each account you use. (Hint: there will be two pairs of debits and credits, i.e., two journal entries.
Expert Answer:
