Question
Pina Construction Company uses the percentage-of-completion method of accounting. In 2020, Pina began work under contract #E2-D2, which provided for a contract price of $2,158,000.
Pina Construction Company uses the percentage-of-completion method of accounting. In 2020, Pina began work under contract #E2-D2, which provided for a contract price of $2,158,000. Other details follow:
| 2020 | 2021 | |||
| Costs incurred during the year | $648,400 | $1,429,000 | ||
| Estimated costs to complete, as of December 31 | 972,600 | 0 | ||
| Billings during the year | 426,000 | 2,158,000 | ||
| Collections during the year | 343,000 | 1,513,000 |
(a)
What portion of the total contract price would be recognized as revenue in 2020? In 2021?
| Revenue recognized in 2020 | $ | |
| Revenue recognized in 2021 | $ |
b) Assuming the same facts as those above except that Hamilton uses the completed-contract method of accounting, what portion of the total contract price would be recognized as revenue in 2021?
Revenue recognized in 2021:
(c) Prepare a complete set of journal entries for 2020 (using the percentage-of-completion method).
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Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
978-0132148238
