On March 1, 2025, Pharoah Construction Company contracted to construct a factory building for Bloom Manufacturing Inc. for a totalcontract price of $8,330,000. The building was completed by October 31, 2027. The annual contract costs incurred, estimated costs tocomplete the contract, and accumulated billings to Bloom for 2025, 2026, and 2027 are given below.202520262027Contract costs incurred during the year$2,662,800$2,188,000 $2,389,200Estimated costs to complete the contract at 12/31Billings to Bloom during the year3,180,0003,677,200 2,389,2003,480,000-0-1,670,000(a1)Using the percentage-of-completion method, prepare a schedule to compute the profit or loss to be recognized as a result of thiscontract for the year ended December 31, 2025. (Ignore income taxes.) (If answer is 0, please enter O. Do not leave any fields blank.Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)2025LA%

Schedule of Profit or Loss (Percentage-of-Completion Method) - Pharoah Construction CompanyContract…

Answered: On March 1, 2025, Pharoah Construction…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 26E

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On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
On March 1, 2020, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2022. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2020, 2021, and 2022 are given below. 2020 2021 2022 Contract costs incurred during the year $2,880,000 $2,230,000 $2,190,000 Estimated costs to complete the contract at 12/31 3,520,000 2,190,000 –0– Billings to Fabrik during the year 3,200,000 3,500,000 1,700,000 Instructions a. Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2020, 2021, and 2022. (Ignore income taxes.) b. Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a…
On January 1, 2021. Robredo Co. started the construction of a building with a fixed contract price of P10,000,000. The outcome of the construction project can be estimated reliably and the contractor decided to employ cost to cost method. The following data are provided by the accountant and project manager concerning the construction costs for the three years of construction: Year 12/31/2021 12/31/2022 12/31/2023 P 3740000 Costs incurred during the year Realized gross profit/(loss) during the year Percentage of completion as of the end of the year ? ? P750,000 (P250,000) (P800,000) 50% 37.5% ? What is the balance of Construction in Progress on December 31, 2023?
On February 1, 2023, Sandhill Contractors agreed to construct a building at a contract price of $3,460,000. The total estimated construction costs would be $1,890,000 and the project would be finished in 2025. Information relating to the costs and billings for this contract is as follows: Total costs incurred to date Estimated costs to complete Customer billings to date Collections to date 2023 Gross profit/ (loss) 689,850 1,200,150 1,100,000 1,000,000 2023 2024 573050 $1,162,000 $ 2,365,000 913,000 1,890,000 1,750,000 2025 Calculate the gross profit / (loss) that should be recognized for 2023, 2024, and 2025 using the percentage completion method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round percentage complete to 1 decimal place, e.g. 15.2% and final answers to O decimal places, e.g. 5,125.) 2024 -0- 3,460,000 2,950,000 -107450 $ LA 2025 40450
During 2025, Ivanhoe Company started a construction job with a contract price of $1,610,000. The job was completed in 2027. The following information is available. Costs incurred to date Estimated costs to complete Billings to date Collections to date 2025 $383,800 $905,280 626,200 302,000 2026 271,000 198,720 896,000 817,000 2027 $1,063,000 -0- 1,610,000 1,419,000
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SMDC Construction signed a contract to build a building over a period 3 years for a price of P10,000,000. Information relating to the performance of the contract is summarized as follows: 2017 2018 2019 contribution costs incurred during the year 2,500,000 2,400,000 1,800,000 estimated costs to complete 4,500,000 1,800,000 - buildings during the year 2,200,000 2,800,000 5,000,000 collections during the year 2,000,000 2,500,000 5,500,000 Prepare the entries under the percentage of completion.
On January 1, 2016, AVIDA was contracted to construct a townhouse for SM Corp. for a total contract price of P50,400,000. The building was completed by November 31, 2018. The following are the data of AVIDA: 2017 2018 Contract cost incurred during the year 19,200,000 15,600,000 8,700,000 Estimated cost at completion 38,400,000 43,500,000 43,500,000 Billing during the year 19,200,000 21,000,000 10,200,000 The entry to record the recognized profit in 2018 includes credit to Contract cost 8,700,000 CIP 50,400,000 CIP 1,380,000 Contract revenue 10,080,000
Recording Long-Term Construction: Recognize Revenue at a Point in Time and Over Time Watson Construction Company contracted to build a plant for $500,000. Construction started in January 2020 and was completed in November 2021. Watson uses the cost-to-cost method to measure the completion of its performance obligations. Data relating to the contract follow. 2020 2021 Costs incurred during year $290,000 $120,000 Estimated additional costs to complete 125,000 0 Billings during year 270,000 230,000 Cash collections during year 250,000 250,000 Revenue Recognized at a Point in Time Revenue Recognized Over Time a. Provide the 2020 and 2021 journal entries for Watson assuming revenue is recognized at a point in time. Provide entries for (1) construction costs incurred, (2) progress billings, (3) cash collections, and (4) revenues and expenses. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr.…
During 2025, Cullumber Company started a construction job with a contract price of $1,620,000. The job was completed in 2027. The following information is available. Costs incurred to date Estimated costs to complete Billings to date Collections to date Ⓡ 2025 $393,900 $889,380 Gross profit recognized in 2026 616,100 Gross profit recognized in 2027 303,000 273.000 Gross profit recognized in 2025 $ 2026 $ $ 208,620 902,000 814,000 2027 Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. $1,061,000 -0- 1,620,000 1,418,000
Rasher Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract provided for progress payments. RCL's accounting year ends December 31. Work began under the contract on August 1, 2017, and was completed on October 31, 2019. Construction activities are summarized below: 2017 2018 450,000 190,000 535,500 375,000 2019 Construction costs incurred during the year 180,000 Estimated remaining costs to complete Progress Billings to date Cash Collections to date 195,000 630,000 153,000 140,000 975,000 450,000 REQUIRED 1. Record RCL's journal entries assuming that the percentage-of-completion method is used. Assume that the percentage of completion is measured by the ratio of costs incurred to date divided by total estimated construction costs. 2. Complete the following table for RCL using the percentage-of-completion method (as of and for the year ended December 31): 2017 2018 2019 Accounts Receivable CIP Inventory Billings on Contract Cost in excess…
Fender Construction Company receives a contract to construct a building over a period of 3 years for a price of $700,000. The contract represents a single performance obligation that will be satisfied over time. Information relating to the performance of the contract is summarized as follows: 2019 2020 2021 Construction costs incurred during the year $150,000 $242,000 $168,000 Estimated costs to complete 350,000 168,000 — Billings during the year 120,000 250,000 330,000 Collections during the year 100,000 260,000 340,000 Required: 1. Prepare journal entries for all 3 years. 2. Assume that the contract represents a single performance obligation that will be satisfied at a point in time. Prepare journal entries for all 3 years. Please dont provide image based answers thank you

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