On January 2010, P & P Products cbegan construction on astorage facility for Alpha Company. he President of P& PProducts has consulted with the controller regarding estimated costand the resulting profit. During her discussion with the controllershe was informed that P & P Products used the completedcontract method to account for the construction project. Thepresident asked the controller about the percentage of completionmethod she remembered from her college accounting courses. She isconcerned about recognizing all of the profit in a single year. Sheasked that the controller prepare a schedule showing the effect onthe income statement and balance sheet under thepercentage-of-completion vs the completed contract method.Unfortunately, the controller has delegated this task to you.
Cost for 2010= $3.2 million, cost for 2011= $5,760,000, cost for2012= $3,840, 000
Estimated cost to complete as of the end of 2010, $10,800,000.00,estimated cost to complete as of the end of 2011$4,000,000.00.
Billings to Alpha Company in 2010 was $3,000,000.00, for 2011$5,000,000.00 with remaining billings during 2012.
The contract price was $18,000,000.00
Requirement:
A. Prepare a schedule showing how much profit is recognized foryears 2010, 2011, and 2012 under the percentage of completion andcompleted contract method.
B. Prepare a schedule showing how much gross profit isrecognized for years 2010, 2011, and 2012 under thecompleted-construction.
On January 2010, P & P Products cbegan construction on astorage facility for Alpha Company. he President of P& PProducts has consulted with the controller regarding estimated costand the resulting profit. During her discussion with the controllershe was informed that P & P Products used the completedcontract method to account for the construction project. Thepresident asked the controller about the percentage of completionmethod she remembered from her college accounting courses. She isconcerned about recognizing all of the profit in a single year. Sheasked that the controller prepare a schedule showing the effect onthe income statement and balance sheet under thepercentage-of-completion vs the completed contract method.Unfortunately, the controller has delegated this task to you.
Cost for 2010= $3.2 million, cost for 2011= $5,760,000, cost for2012= $3,840, 000
Estimated cost to complete as of the end of 2010, $10,800,000.00,estimated cost to complete as of the end of 2011$4,000,000.00.
Billings to Alpha Company in 2010 was $3,000,000.00, for 2011$5,000,000.00 with remaining billings during 2012.
The contract price was $18,000,000.00
Requirement:
A. Prepare a schedule showing how much profit is recognized foryears 2010, 2011, and 2012 under the percentage of completion andcompleted contract method.
B. Prepare a schedule showing how much gross profit isrecognized for years 2010, 2011, and 2012 under thecompleted-construction.
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