Question
On February 9, 2020, Stiller Co. signed a $2.60 million contract to construct an office and warehouse for a small wholesale company. The project was
On February 9, 2020, Stiller Co. signed a $2.60 million contract to construct an office and warehouse for a small wholesale company. The project was originally expected to be completed in two years, but difficulties in hiring a sufficient pool of skilled workers extended the completion date by an extra year. As well, significant increases in the price of steel in the second year resulted in cost overruns on the project. Stiller Co. was able to negotiate a partial recovery of these costs, and the total contract value was adjusted to $3 million in the second year. Additional information from the project is as follows:
| 2020 | 2021 | 2022 | |
| Total contract value | $2,600,000 | $3,000,000 | $3,000,000 |
| Accumulated costs to date | 616,000 | 1,452,000 | 3,200,000 |
| Estimated costs to complete the project | 1,584,000 | 1,848,000 | 0 |
| Customer billings to date | 700,000 | 1,200,000 | 3,000,000 |
| Cash collected to date | 700,000 | 1,100,000 | 3,000,000 |
a) Calculate the amount of gross profit to be recognized each year using the percentage-of-completion method. Please make sure your final answer(s) are accurate to the nearest whole number.
2020 2021 2022
Gross profit (loss) for the year
b) Prepare all the required journal entries for the year ended December 31, 2021. Please make sure your final answer(s) are accurate to 2 decimal places. Enter an appropriate description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (ie. January 15 would be 15/Jan).
Assume that the increase in material costs has created significant uncertainty for the contract. c) Using the zero-profit method (IFRS), determine the amount of revenue and expense to report each year. Enter 0 if any amount is zero. Please make sure your final answer(s) are accurate to the nearest whole number.
2020 2021 2022
Revenue Expense
d) Using the completed-contract method (ASPE), determine the amount of revenue and expense to report each year. Enter 0 if any amount is zero. Please make sure your final answer(s) are accurate to the nearest whole number.
2020 2021 2022
Revenue Expense
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started