Assignment Objective: Specific course learning objective To help you understand how to account for some special problem areas of revenue recognition such as long-term contracts REQUIRED: For Questions 1-2: 1. Provide all the necessary journal entries and adjusting journal entries for each year of the contract 2. Provide the income statement and balance sheet reporting for each year of the contract. For the balance sheet reporting, be sure to indicate in which section of the classified balance sheet the account(s) are reported. Ignore the cash account. Your answers and supporting work must be typed. Also, you must include all necessary supporting calculations for adjusting entries or explanations if no adjusting entry is recorded. Assume each firm below has a 12/31 fiscal year end. 1. During 2017, Turlington Construction started a new construction job with a contract price of $65 million. Turlington has determined that revenue recognition over time based on the percentage of completion is appropriate for this long term contract. The contract was completed on 12/31/19 with the following information ($ in millions): 2017 2018 2019 Costs incurred in the period (paid in cash) $18.8 $27.4 $18.3 Estimated costs to complete at 12/31 21.2 13.8 0 Billings on contract in the period 35 10.0 20.0 Cash collected in the period 30 13.0 22.0 2. During 2017, Masted Construction started a new construction job with a contract price of $24 million. Masted has determined that revenue recognition over time based on the percentage of completion is appropriate for this long term contract. The contract was completed on 12/31/19 with the following information ($ in millions): 2017 2018 2019 Costs incurred in the period (paid in cash) $5.6 $13.9 $7 Estimated costs to complete at 12/31 14.4 6.5 0 Billings on contract in the period 10 4 Cash collected in the period 8 8 8 10 Assignment Objective: Specific course learning objective To help you understand how to account for some special problem areas of revenue recognition such as long-term contracts REQUIRED: For Questions 1-2: 1. Provide all the necessary journal entries and adjusting journal entries for each year of the contract 2. Provide the income statement and balance sheet reporting for each year of the contract. For the balance sheet reporting, be sure to indicate in which section of the classified balance sheet the account(s) are reported. Ignore the cash account. Your answers and supporting work must be typed. Also, you must include all necessary supporting calculations for adjusting entries or explanations if no adjusting entry is recorded. Assume each firm below has a 12/31 fiscal year end. 1. During 2017, Turlington Construction started a new construction job with a contract price of $65 million. Turlington has determined that revenue recognition over time based on the percentage of completion is appropriate for this long term contract. The contract was completed on 12/31/19 with the following information ($ in millions): 2017 2018 2019 Costs incurred in the period (paid in cash) $18.8 $27.4 $18.3 Estimated costs to complete at 12/31 21.2 13.8 0 Billings on contract in the period 35 10.0 20.0 Cash collected in the period 30 13.0 22.0 2. During 2017, Masted Construction started a new construction job with a contract price of $24 million. Masted has determined that revenue recognition over time based on the percentage of completion is appropriate for this long term contract. The contract was completed on 12/31/19 with the following information ($ in millions): 2017 2018 2019 Costs incurred in the period (paid in cash) $5.6 $13.9 $7 Estimated costs to complete at 12/31 14.4 6.5 0 Billings on contract in the period 10 4 Cash collected in the period 8 8 8 10
