Actg351 Hw1
ACTG 351 HW #1 Answers 1. Curtiss Construction Company, Inc. entered into a fixed-price contract with Axelrod Associates on July 1, 2011, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,000,000. The building was completed on December 31, 2013. Accumulated contract costs incurred, estimated costs to complete the contract, accumulated billings to Axelrod and cash collections from Axelrod under the contract are as follows: 12/31/2011 $350,000 3,150,000 720,000 600,000 12/31/2012 $2,500,000 1,700,000 2,170,000 1,800,000 12/31/2013 $4,250,000 0 3,600,000 3,600,000
Costs incurred to date Estimated costs to complete Billings to Axelrod, to date Cash collections, to date
a. Assume that Curtiss appropriately accounts for this contract under the percentage of completion method. Compute the amount of gross profit or loss to be recognized each of the three years. Record the necessary journal entries for each year (credit Various Accounts for construction costs incurred).
2011 350,000 3,150,000 3,500,000 10.00% 2012 2,500,000 1,700,000 4,200,000 59.52% 2013 4,250,000 0 4,250,000 100.00% 1,619,200 1,669,200 -50,000
Cost Incurred to Date Estimated Costs Total Estimated Costs % Completed Revenue Expense Gross Profit
400,000 1,980,800 350,000 2,230,800 50,000 -250,000
2011 Account 1) Record Construction Costs CIP Various Accounts 2) Record Revenue Construction Expense CIP Revenue 3) Billings A/R Billings on CIP Dr 350,000 350,000 Cr
2012 Dr 2,150,000
Cr
2013 Dr 1,750,000
Cr
2,150,000
1,750,000
350,000 50,000 400,000
2,230,800 250,000 1,980,800
1,669,200 50,000 1,619,200
720,000 720,000
1,450,000 1,450,000
1,430,000 1,430,000
4) Receive Cash Cash A/R 5)Close Accounts Wait until 2014
600,000 600,000
1,200,000 1,200,000
1,800,000 1,800,000
b. Assume that
Costs incurred to date Estimated costs to complete Billings to Axelrod, to date Cash collections, to date
a. Assume that Curtiss appropriately accounts for this contract under the percentage of completion method. Compute the amount of gross profit or loss to be recognized each of the three years. Record the necessary journal entries for each year (credit Various Accounts for construction costs incurred).
2011 350,000 3,150,000 3,500,000 10.00% 2012 2,500,000 1,700,000 4,200,000 59.52% 2013 4,250,000 0 4,250,000 100.00% 1,619,200 1,669,200 -50,000
Cost Incurred to Date Estimated Costs Total Estimated Costs % Completed Revenue Expense Gross Profit
400,000 1,980,800 350,000 2,230,800 50,000 -250,000
2011 Account 1) Record Construction Costs CIP Various Accounts 2) Record Revenue Construction Expense CIP Revenue 3) Billings A/R Billings on CIP Dr 350,000 350,000 Cr
2012 Dr 2,150,000
Cr
2013 Dr 1,750,000
Cr
2,150,000
1,750,000
350,000 50,000 400,000
2,230,800 250,000 1,980,800
1,669,200 50,000 1,619,200
720,000 720,000
1,450,000 1,450,000
1,430,000 1,430,000
4) Receive Cash Cash A/R 5)Close Accounts Wait until 2014
600,000 600,000
1,200,000 1,200,000
1,800,000 1,800,000
b. Assume that