Respuesta :
Answer:
1. 2021 2022 2023
revenue 0 0 10000000
costs incurred 0 0 8105400
gross profit 0 0 1894600
2.a Debit Bank 1700000 credit Deferred Revenue 1700000
Debit prepaid contract cost 2291000 Credit Various account 2291000
2.b Debit Bank 3500000 Credit Deferred revenue 3500000
Debit Prepaid contract cost 3555000 Credit various account 3555000
Debit Billing 391000 Billing in excess 391000
2.c Debit Bank 4800000 Deferred revenue 4800000
Debit prepaid contract costs 2259400 Credit Various Accounts 2259400
Debit Billing 1894600 Credit Billing in excess 1894600
3. Balance sheet 2021 2022
liabilities
deferred revenue 1700000 3500000
billing in excess 0 391000
4. 2021 2022 2023
revenue 0 0 10000000
costs incurred 0 0 9575000
gross profit 0 0 425000
5.revenue 0 0 10000000
costs incurred 0 0 10430000
gross loss 0 0 430000
Explanation:
The contract does not qualify for an over time revenue recognition therefore cash collected is not revenue until performance obligation is satisfied.
Matching principle states that costs or expenses incurred must be matched to the relevant revenues or income
and AS7 states if there is an excess in estimated cost in revenues then it must be recognized as an expense in that year
excess billing is a liability
1. The amount of Revenue and Gross Profit (Loss) to be recognized:
2021 2022 2023
Revenue recognized $2,900,000 $4,500,000 $2,600,000
Cost incurred $2,291,000 $3,555,000 $2,259,400
Gross profit (loss) $609,000 $945,000 $340,600
2-a. Journal Entries for 2021:
Debit Construction Costs $2,291,000
Credit Various accounts $2,291,000
To record the construction costs for the year.
Debit Accounts Receivable $1,900,000
Credit Unearned Revenue $1,900,000
To record unearned revenue from billings to customer.
Debit Cash $1,700,000
Credit Accounts Receivable $1,700,000
To record cash received from customer.
Debit Unearned Revenue $2,900,000
Credit Construction Revenue $2,900,000
To record revenue recognized for the year.
2-b. Journal Entries for 2022:
Debit Construction Costs $3,555,000
Credit Various accounts $3,555,000
To record the construction costs for the year.
Debit Accounts Receivable $3,946,000
Credit Unearned Revenue $3,946,000
To record unearned revenue from billings to customer.
Debit Cash $3,500,000
Credit Accounts Receivable $3,500,000
To record cash received from customer.
Debit Unearned Revenue $4,500,000
Credit Construction Revenue $4,500,000
To record revenue recognized for the year.
2-c. Journal Entries for 2023:
Debit Construction Costs $2,259,400
Credit Various accounts $2,259,400
To record the construction costs for the year.
Debit Accounts Receivable $4,154,000
Credit Unearned Revenue $4,154,000
To record unearned revenue from billings to customer.
Debit Cash $4,800,000
Credit Accounts Receivable $4,800,000
To record cash received from customer.
Debit Unearned Revenue $2,600,000
Credit Construction Revenue $2,600,000
To record revenue recognized for the year.
3. Partial Balance Sheet for the years ended 2021 and 2022
2021 2022
Current Assets:
Accounts Receivable $200,000 $646,000
Current Liabilities:
Unearned Revenue ($1,000,000) ($1,554,000)
Equity:
Gross profit $609,000 $945,000
4. The amount of Revenue and Gross Profit (Loss) to be recognized:
2021 2022 2023
Revenue recognized $3,100,000 $4,000,000 $2,900,000
Cost incurred $2,510,000 $3,855,000 $3,210,000
Gross profit (loss) $590,000 $145,000 ($310,000)
5. The amount of Revenue and Gross Profit (Loss) to be recognized:
2021 2022 2023
Revenue recognized $3,100,000 $3,600,000 $3,300,000
Cost incurred $2,510,000 $3,855,000 $4,065,000
Gross profit (loss) $590,000 ($255,000) ($765,000)
Data and Calculations:
Revenue from Contract = $10,000,000
2021 2022 2023
Cost incurred $ 2,291,000 $ 3,555,000 $ 2,259,400
Estimated costs to complete 5,609,000 2,054,000 0
Total costs (incurred and
estimated) $7,900,000 $7,900,000 $8,105,400
Billings 1,900,000 3,946,000 4,154,000
Cash collections 1,700,000 3,500,000 4,800,000
Percentage of completion for 2021 = 29% ($2,291,000/$7,900,000 x 100)
Percentage of completion for 2022 = 45% ($3,555,000/$7,900,000 x 100)
Percentage of completion for 2023 = 26% (100 - 29% - 45%)
The amount of Revenue and Gross Profit (Loss) to be recognized based on percentage of completion:
2021 2022 2023
Revenue recognized $2,900,000 $4,500,000 $2,600,000
= ($10,000,000 x 29%) ($10,000,000 x 45%) ($10,000,000 x 26%)
Cost incurred $2,291,000 $3,555,000 $2,259,400
Gross profit (loss) $609,000 $945,000 $340,600
2021 2022 2023
Cost incurred $ 2,510,000 $ 3,855,000 $ 3,210,000
Estimated costs to complete 5,710,000 3,210,000 0
Total costs (incurred and
estimated) $8,220,000 $9,575,000 $9,575,000
Percentage of completion 31% 40% 29%
Revenue recognized $3,100,000 $4,000,000 $2,900,000
Cost incurred $2,510,000 $3,855,000 $3,210,000
Gross profit (loss) $590,000 $145,000 ($310,000)
2021 2022 2023
Cost incurred $ 2,510,000 $ 3,855,000 $ 4,065,000
Estimated costs to complete 5,710,000 4,210,000 0
Total costs (incurred and
estimated) $8,220,000 $10,575,000 $14,640,000
Percentage of completion 31% 36% 33%
Revenue recognized $3,100,000 $3,600,000 $3,300,000
Cost incurred $2,510,000 $3,855,000 $4,065,000
Gross profit (loss) $590,000 ($255,000) ($765,000)
