The document discusses two long-term construction projects and provides financial information for each year of the projects. It asks the reader to calculate various accounting figures for the projects using both the percentage-of-completion and cost recovery methods. Specifically, it asks the reader to compute revenue recognized, gross profit recognized, balances in the construction in progress and progress billings accounts, and the net balance of CIP or progress billings for each year of the two construction projects.
The document discusses two long-term construction projects and provides financial information for each year of the projects. It asks the reader to calculate various accounting figures for the projects using both the percentage-of-completion and cost recovery methods. Specifically, it asks the reader to compute revenue recognized, gross profit recognized, balances in the construction in progress and progress billings accounts, and the net balance of CIP or progress billings for each year of the two construction projects.
The document discusses two long-term construction projects and provides financial information for each year of the projects. It asks the reader to calculate various accounting figures for the projects using both the percentage-of-completion and cost recovery methods. Specifically, it asks the reader to compute revenue recognized, gross profit recognized, balances in the construction in progress and progress billings accounts, and the net balance of CIP or progress billings for each year of the two construction projects.
The document discusses two long-term construction projects and provides financial information for each year of the projects. It asks the reader to calculate various accounting figures for the projects using both the percentage-of-completion and cost recovery methods. Specifically, it asks the reader to compute revenue recognized, gross profit recognized, balances in the construction in progress and progress billings accounts, and the net balance of CIP or progress billings for each year of the two construction projects.
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REVENUE RECOGNITION: LONG TERM CONSTRUCTION
Question 12: XIII - Computation of CIP, net and Progress Billings
On January 1, 2005, Cleveland Enterprises obtained a contract to construct a building. It was estimated at the beginning of the contract that it would take three years to complete the project at an expected cost of P200,000. The contract price was P250,000. The following information describes the status of the job at the close of production each year:
20x4 20x5 20x6
Actual costs incurred P110,000 P120,000 P15,000 Estimated costs to complete 100,000 20,000 0 Billings on contract 125,000 125,000 0 Collections on contract 120,000 120,000 10,000
Required: Compute the items listed below for each year assuming (round all percentages decimals) 1. The use of the overtime/percentage-of-completion cost-to-cost method, and 2. The point-in-time/cost recovery (zero-profit) method
20x4 20x5 20x6 Revenue recognized during the year (1) (6) (11) Gross profit recognized during the year (2) (7) (12) Balance in the construction in progress (CIP) account (3) (8) 0 at December 31 after closing entries) Balance in the progress billing account at December 31 (4) (9) 0 (after closing entries) The balance in CIP, net or Progress Billings, net (5) (10) 0
Cost Recovery Method
20x4 20x5 20x6 Revenue recognized during the year (13) (18) (23) Gross profit recognized during the year (14) (19) (24) Balance in the construction in progress (CIP) account (15) (20) 0 at December 31 after closing entries) Balance in the progress billing account at December (16) (21) 0 31 (after closing entries) The balance in CIP, net or Progress Billings, net (17) (22) 0
Question 13: XIV - Computation of CIP, net and Progress Billings
On January 1, 20x4, Edwards Inc. obtained a contract to construct a building. It was estimated at the beginning of the contract that it would take 3 years to complete the project at an expected cost P200.000. The contract price was P250,000. The following information describes the status of the job at the close of production each year: 20x4 20x5 20x6 Actual costs incurred P150,000 P100,000 P15,000 Estimated costs to complete 90,000 20,000 0
Billings on contract 110,000 120,000 20,000
Collections on contract 100,000 120,000 30,000
Required: Compute the items listed below for each year assuming (round all percentages to two decimals) 1. The use of the overtime/percentage-of-completion cost-to-cost method, and 2. The point-in-time/cost recovery (zero-profit) method
20x4 20x5 20x6
Revenue recognized during the year (1) (6) (11) Gross profit recognized during the year (2) (7) (12) Balance in the construction in progress (CIP) account at (3) (8) (13) December 31 after closing entries) Balance in the progress billing account at December 31 (4) (9) (14) (after closing entries) The balance in CIP, net or Progress Billings, net (5) (10) (15)
Percentage-of-Completion Method (Cost-to-Cost Approach) 20x4 20x5 20x6 Revenue recognized during the year (1) (6) (11) Gross profit recognized during the year (2) (7) (12) Balance in the construction in progress (CIP) (3) (8) 0 account at December 31 after closing entries) Balance in the progress billing account at (4) (9) 0 December 31 (after closing entries) The balance in CIP, net or Progress Billings, net (5) (10) 0
Cost Recovery Method
20x4 20x5 20x6 Revenue recognized during the year (13) (18) (23) Gross profit recognized during the year (14) (19) (24) Balance in the construction in progress (CIP) (15) (20) 0 account at December 31 after closing entries) Balance in the progress billing account at December (16) (21) 0 31 (after closing entries) The balance in CIP, net or Progress Billings, net (17) (22) 0
