Please answer the entire problem and provide explanations where necessary. I'm using this to prepare for an exam, so it will help me to study. Thank you.
Problem 11 [construction contract] On January 1,2020 ABC enters contracts with the State of Texas to build a new loop around a heavily congested part of San Antonio for $50,000,000. The contract allows ABC to make monthly progress billings as work progresses on the project, which is expected to take 3 years to complete. Following are details on the project. Construction costs incurred during the year Construction costs incurred in prior years Cumulative construction costs incurred as of year-end Year-end estimate of costs to complete the job Year-end estimate of total job costs 2020 $17,000,000 $0 $17,000,000 $18,000,000 $35,000,000 2021 $12,000,000 $17,000,000 $29,000,000 $9,000,000 $38,000,000 2022 $13,000,000 $29,000,000 $42,000,000 $0 $42,000,000 Progress billings during the year Cash collections during the year $15,300,000 $13,770,000 $10,800,000 $11,250,000 $23,900,000 $24,980,000 1. Determine the appropriate revenue to be recognized on this contract and complete the income statement and balance sheet excerpts from ABC's financial statements across the 3 year period of the contract. Assume that ABC is creating an asset that has no alternative use to ABC and that the customer does not consume the benefit of the roadway as construction work is performed and that the customer does not control the roadway as it is created Enter your answer below in the green boxes. Complete all boxes--enter zero where appropriate. Income Statement 2020 2021 2022 1 Construction revenues Cost of construction Gross profit on construction jobs 2 3 Balance Sheet (end of year) 2020 2021 2022 Current assets: Accounts receivable Costs and profits in excess of billings 4 5 Current liabilities Billings in excess of costs and profit 6 2. Redo the analysis assuming that that roadway being constructed by ABC does have alternative use to the seller and that the customer does not consume the benefit of the roadway as construction work is performed and that the customer does not control the roadway as it is created. Enter your answer below in the green boxes. Complete all boxes--enter zero where appropriate. Income Statement 2020 2021 2022 Construction revenues Cost of construction Gross profit on construction jobs Balance Sheet (end of year) 2020 2021 2022 Current assets: Accounts receivable Costs and profits in excess of billings Current liabilities Billings in excess of costs and profit Problem 11 [construction contract] On January 1,2020 ABC enters contracts with the State of Texas to build a new loop around a heavily congested part of San Antonio for $50,000,000. The contract allows ABC to make monthly progress billings as work progresses on the project, which is expected to take 3 years to complete. Following are details on the project. Construction costs incurred during the year Construction costs incurred in prior years Cumulative construction costs incurred as of year-end Year-end estimate of costs to complete the job Year-end estimate of total job costs 2020 $17,000,000 $0 $17,000,000 $18,000,000 $35,000,000 2021 $12,000,000 $17,000,000 $29,000,000 $9,000,000 $38,000,000 2022 $13,000,000 $29,000,000 $42,000,000 $0 $42,000,000 Progress billings during the year Cash collections during the year $15,300,000 $13,770,000 $10,800,000 $11,250,000 $23,900,000 $24,980,000 1. Determine the appropriate revenue to be recognized on this contract and complete the income statement and balance sheet excerpts from ABC's financial statements across the 3 year period of the contract. Assume that ABC is creating an asset that has no alternative use to ABC and that the customer does not consume the benefit of the roadway as construction work is performed and that the customer does not control the roadway as it is created Enter your answer below in the green boxes. Complete all boxes--enter zero where appropriate. Income Statement 2020 2021 2022 1 Construction revenues Cost of construction Gross profit on construction jobs 2 3 Balance Sheet (end of year) 2020 2021 2022 Current assets: Accounts receivable Costs and profits in excess of billings 4 5 Current liabilities Billings in excess of costs and profit 6 2. Redo the analysis assuming that that roadway being constructed by ABC does have alternative use to the seller and that the customer does not consume the benefit of the roadway as construction work is performed and that the customer does not control the roadway as it is created. Enter your answer below in the green boxes. Complete all boxes--enter zero where appropriate. Income Statement 2020 2021 2022 Construction revenues Cost of construction Gross profit on construction jobs Balance Sheet (end of year) 2020 2021 2022 Current assets: Accounts receivable Costs and profits in excess of billings Current liabilities Billings in excess of costs and profit
