ACC349 Accounting Theory and Practice

Chapter 6 Simulation

Assume ABC Company contracted to complete a project for a customer for a contract price of $2,000,000. The project began in 2019 and will be completed in 2020. Data related to the project is summarized below:

2019 2020

Construction costs incurred during the year $ 400,000 $ 1,475,000

Construction costs incurred in prior years $ 0 $ 400,000

Cumulative actual construction costs $ 400,000 $ 1,875,000

Estimated costs to complete $ 1,200,000 $ 0

Total Estimated and Actual Construction

Costs $ 1,600,000 $ 1,875,000

Billings during the year $ 380,000 $ 1,620,000

Cash collections during the year $ 250,000 $ 1,750,000

Required:

1. Prepare the journal entries to record actual costs incurred, billings, and collections for 2019 and 2020. Use Journal paper!
2. Compute the amount or Revenue and Gross Profit to be recognized in each year (2019 and 2020) using the percentage of completion method, recognizing income over a period of time.
3. Record the journal entries necessary to record the revenue and gross profit or loss in 2019 and 2020.
4. What ending balances would be represented in the Balance Sheet at the end of 2019?

Prepare a partial portion of the Balance Sheet for the presentation of the balances.