Cepparo Ltd. entered into a contract on January 1, 2021, to construct a new hotel for client. The total fixed price for the contract is $35 million. The job was completed in December 2022. Details of the project are as follows: 2021 2022 $20,000,000 $11,000,000 Costs incurred in the period Estimated costs to complete the project 10,000,000 Customer billings in the period Cash collected in the period 18,000,000 17,000,000 17,000,000 15,000,000 Required: Calculate the amount of gross profit to be recognized each year using the percentage of-completion method and prepare all the required journal entries for both years.

Cepparo Ltd. entered into a contract on January 1, 2021, to construct a new hotel for client. The total fixed price for the contract is $35 million. The job was completed in December 2022. Details of the project are as follows: 2021 2022 $20,000,000 $11,000,000 Costs incurred in the period Estimated costs to complete the project 10,000,000 Customer billings in the period Cash collected in the period 18,000,000 17,000,000 17,000,000 15,000,000 Required: Calculate the amount of gross profit to be recognized each year using the percentage of-completion method and prepare all the required journal entries for both years.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 88P

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Cepparo Ltd. entered into a contract on January 1, 2021, to construct a new hotel for a client. The total fixed price for the contract is $35 million. The job was completed in December 2022. Details of the project are as follows: 2021 2022 $20,000,000 $11,000,000 Costs incurred in the period Estimated costs to complete the project 10,000,000 Customer billings in the period Cash collected in the period 18,000,000 17,000,000 17,000,000 15,000,000 Required: Calculate the amount of gross profit to be recognized each year using the percentage- of-completion method and prepare all the required journal entries for both years.
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On February 1, 2020, Mar Contractors agreed to construct a building at a contract price of $15,400,000. Mar initially estimated total construction costs would be $12,000,000 and the project would be finished in 2023. Information relating to the costs and billings for this contract during 2020-2022 is as follows: 2020 2021 2022 Total costs incurred during the year 4,500,000 5,300,000 4,000,000 Estimated costs to complete 7,500,000 4,200,000 1,800,000 Customer billings to date 6,600,000 12,000,000 13,800,000 Collections to date 6,000,000 10,500,000 13,500,000 Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract and all the necessary journal entries for the years ended December 31, 2020, 2021, and 2022. Using the cost-recovery method,…
Rogers Ltd. has entered into a contract beginning in February 2020 to build two warehouses for ocean Ltd. The contract is a non-cancellable fixed price contract for $9.4 million. The following data pertain to the construction period. 2020 2021 2022 Costs for the year $3,285,000 4,015,000 1,800,000 Estimated costs to complete 4,015,000 1,825,000 -0- Progress billings for the year (non-refundable) 2,960,000 3,440,000 3,000,000 Cash collected for the year 2,605,000 3,490,000 3,305,000 a) Using the percentage-of-completion method, calculate the percent complete for each year of the contract. b) Calculate the amount of the gross profit to be recognized each year of the contract. c) Prepare the journal entries for 2020 and 2021. (Use Materials, Cash, Payables for costs incurred to date.) d) What is the balance in the Contract Asset/Liability account at December 31, 2020 and 2021? Show how the construction contract would be reported on the SFP…
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