In March 2024, VanHoof Engineering Ltd. (VHEL) was awarded an $86-million contract to construct a bridge over
Question:
In March 2024, VanHoof Engineering Ltd. (“VHEL”) was awarded an $86-million contract to construct a bridge over the South Saskatchewan River for the City of Saskatoon. VHEL estimated that it would take two years to take the project from planning through to completion. The company has a December 31 year end and uses the percentage-of-completion method, with completion measured as the ratio of costs incurred to date to the total estimated construction costs. VHEL’s contract provides it with an enforceable right to payment for its performance to date, including a reasonable profit margin, in the event of contract cancellation. VHEL had the following information available in relation to this construction contract:
Required
a. Determine the percentage of completion, revenue, and gross profit to be recognized for each year of the contract.
b. Prepare all necessary journal entries for each year of the contract.
Step by Step Answer:
Understanding Financial Accounting
ISBN: 9781119715474
3rd Canadian Edition
Authors: Christopher D. Burnley