Question

3. Broncos Construction Ltd. reported the following construction activity in 2020, their first year of operations: Total Contract Contract Price $ 260,000 Billings through 12/31/20 $ 170,000 130,000 388,000 $ 688,000 Cash collections through 12/31/20 $ 155,000 130,000 316,000 $ 601,000 Costs Incurred through 12/31/20 $ 182,000 100,000 252,000 $534.000 Estimated Additional Costs to Complete $ 63,000 247,000 -O- $ 310,000 325,000 388,000 $ 973,000 N Each of the above contracts is with a different customer, and any work remaining at December 31. 2020 is expected to be completed in 2021. Instructions Prepare iournal entries, a partial income statement and a partial statement of financial indicate how the above contract information would be reported for the year ended position to indicate how the above con December 31, 2020. Broncos use the percentage-of-completion method. 2. Prepare journal entries, a partial income statement an position to indicate how the above contra comber 31.2020 if Broncos uses the zero-profit method a partial income statement and a partial statement of financial w the above contract information would be reported for the year ended

Answer 1

1).Contract Revenue Recognition under % of Completion Method Estimated S. No Cost Incurred Estimated Particulars % of Total Profit Cash Sales Booked Un Billed Revenue Accounts Sales/(Billed Receivable/( Payables) Additional Total Cost Complication Contract Recognition Recognition Collected in Advance) Cost Price (F-C/D 100%) G (E-C+D) (H-G*F/100) (H-C) (K=H-J) (M-H-L) A В c L A) $182,000.00 $63,000.00 $245,000.00 74.29 $260,000.00 $193,142.86 $11,142.86 $155,000.00 38,142.86 170000 23,142.86 X 28.82 $325,000.00 $ 93,659.94 (6,340.06)$130,000.00 $(36,340.06) 130000 $(36,340.06) $100,000.00 $247,000.00 $347,000.00 В). Y $252,000.00 $ $252,000.00 100.00 $388,000.00 $388,000.00 $136,000.00 $316,000.00 72,000.00 388000 $ C). z 73,802.80 $688,000.00 $ (13,197.20) $534,000.00 $674,802.80 $140,802.80 D-A+B+C 2).Contract Revenue Recognition under Zero Profit or Cost Recovery Method % of Profit Profit Particulars Cost Incurred Estimated Estimated Total Cash Sales Booked Un Billed S. No. Revenue Accounts Receivable/( Sales/(Billed Recognition in Advance) under this method Additional Total Cost Complication Contract Recognition Recognition Collected Payables) Cost Price |(F=C/D*100%) G (K=H-J) (E=C+D) (H-G*F/100) (H-C) (M-H-L) (N=J-C) A В C D $182,000.00 $ 63,000.00 $245,000.00 74.29 $260,000.00 $193,142.86 $11,142.86 $155,000.00 38,142.86 170000 23,142.86 $ A). X $ 93,659.94 $ (6,340.06) $130,000.00 $(36,340.06) 100.00 $388,00o.00 $388,000.00 $136,000.00 $316,000.00 72,000.00 130000 $(36,340.06) $ (6,340.06) 388000 $ 28.82 $325,000.00 $100,000.00 $247,000.00 $347,000.00 B) $ 64,000.00 $252,000.00 $ $252,000.00 C). Z $534,000.00 $674,802.80 $140,802.80 73,802.80 $688,000.00 $(13,197.20) $57,659.94 D A+B+C

1).Journal Entries Particulars Debit Credit Date XX-XX-XXXX Cash $155,000.00 $38,142.00 Accounts Receivables $ 23,142.00 Un Billed Sales Billed Sales $170,000.00 (X Contract Sales Booking) $193,142.00 $193,142.00 $130,000.00 XX-XX-XXXX Cash $36,340.00 Accounts Receivables $36,340.00 Un Billed Sales Billed Sales $130,000.00 (Y Contract Sales Booking) $166,340.00 $166,340.00 $316,000.00 $ 72,000.00 XX-XX-XXXX Cash Accounts Receivables Un Billed Sales $388,000.00 Billed Sales (Z Contract Sales Booking) $388,000.00 $388,000.00 2).Journal Entries Particulars Debit Credit Date $155,000.00 XX-XX-XXXX Cash 38,142.00 Accounts Receivables $ 23,142.00 Un Billed Sales Billed Sales $170,000.00 (X Contract Sales Booking) $193,142.00 $193, 142.00 $130,000.00 XX-XX-XXXX Cash $ 36,340.00 Accounts Receivables $36,340.00 Un Billed Sales Billed Sales $130,000.00 (Y Contract Sales Booking) $166,340.00 $166,340.00 $316,000.00 $ 72,000.00 XX-XX-XXXX Cash Accounts Receivables Un Billed Sales $ $388,000.00 Billed Sales (Z Contract Sales Booking) $388,000.00 $388,000.00

In the Second method

Profit Only can be recognized when they receive all pending amounts from customers over the cost incurred towards the projects, but the loss can be immediately recognized, whether they receive their money are not.