In 2020, CPCE Construction Company entered into a contract to construct a toll bridge for $5,470,000. The toll bridge will be completed in 2023. Information related to the long-term contract is summarized as follows:

Cost incurred during the year

Estimated cost to complete

Billings during the year

Cash collections during the year

2020

S

500,000

2,450,000

970,000

820,000

2021

S

1,260,000

2,980,000

1,150,000

1,020,000

2022

S

1,530,000

2,830,000

430,000

2,500,000

2023

S

2,600,000

0

2,920,000

1,130,000

CPCE Construction Company uses the percentage-of-completion method for revenue recognition and its financial year ended on 31 December.

Required:

a) Calculate the amount of gross profits (losses) to be recognized in each of four financial years from 2020 to 2023 (Note: i. round the percentage of completion, if any, to 2 decimal places; ii. show the percentage of completion of each year; it. round the answers to the nearest dollar; iv.

Marks also given to the clear presentation)

(16 marks)

b) Prepare all necessary journal entries to record (1) costs, (2) billings, (3) cash collections and (4) profit recognition for 2020 only.

(18 marks)

c) Prepare the partial Statement of Financial Position for 2020 and 2021 showing items related to the construction project.

(12 marks)

d) Calculate the amount of gross profits or losses to be recognized in each of the above four years by using "Cost recovery method" for long-term contract (Note: marks also given to the clear presentation).

Question 1 ( 50 marks) In 2020, CPCE Construction Company entered into a contract to construct a toll bridge for $5,470,000. The toll bridge will be completed in 2023 . Information related to the long-term contract is summarized as follows: CPCE Construction Company uses the percentage-of-completion method for revenue recognition and its financial year ended on 31 December. Required: a) Calculate the amount of gross profits (losses) to be recognized in each of four financial years from 2020 to 2023 (Note: i. round the percentage of completion, if any, to 2 decimal places; i. show the percentage of completion of each year; iii. round the answers to the nearest dollar; iv. Marks also given to the clear presentation) (16 marks) b) Prepare all necessary journal entries to record (1) costs, (2) billings, (3) cash collections and (4) profit recognition for 2020 only. (18 marks) c) Prepare the partial Statement of Financial Position for 2020 and 2021 showing items related to the construction project. (12 marks) d) Calculate the amount of gross profits or losses to be recognized in each of the above four years by using "Cost recovery method" for long-term contract (Note: marks also given to the clear presentation). (4 marks)