Question
Rookie Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract provided for progress payments. RCLs accounting year ends December
Rookie Construction Limited (RCL) entered into a contract to construct a building for $975,000. The contract provided for progress payments. RCLs accounting year ends December 31. Work began under the contract on August 1, 2019, and was completed on October 31, 2021. RCL uses the percentage-of-completion method to account for this long-term contract. Construction activities are summarized below:
|
| 2019 | 2020 | 2021 |
| Construction costs incurred to date | 180,000 | 630,000 | 825,000 |
| Estimated remaining costs to complete | 630,000 | 190,000 | 0 |
| Progress Billings during the year | 153,000 | 382,500 | 439,500 |
| Cash Collections to date | 140,000 | 430,500 | 975,000 |
Required: (round calculations to the nearest whole number)
- Prepare the journal entries that should be recorded for 2020. Assume that all of the 2019 journal entries have been properly recorded.
- What should be the balance of Accounts Receivable at December 31, 2020?
- If the estimated remaining costs to complete were $805,000, instead of $630,000, as of December 31, 2019, answer the following questions:
- How much revenue should be reported by RCL for 2019?
- How much profit (loss) should be reported by RCL for 2019?
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