On January 1, 2013, Bentley
Contractors agreed to construct a building at a contract price of
$6,000,000. Bentley estimated total
construction costs would be $4,200,000 and the project would be finished in
2015. Information related to the costs
and billings for this contract is as follows:
2013
|
2014
|
2015
|
|
Total costs incurred to date
|
$1,540,000
|
$2,695,000
|
$4,700,000
|
Estimated costs to complete
|
$2,660,000
|
$2,205,000
|
-0-
|
Customer billings to date
|
$2,200,000
|
$4,000,000
|
$6,000,000
|
Collections to date
|
$2,000,000
|
$3,500,000
|
$5,900,000
|
Required:
A.
For
percentage of completion and completed contract accounting, compute the gross
profit or loss that should be recorded by 2013, 2014, and 2015. Fill in the following schedules (show your
work).
Percentage
of completion Completed
contract
Gross Profit Loss Gross Profit Loss
2013 ____________ _____________ 2013 ____________ ____________
2014 ____________ _____________ 2014 ____________ ____________
2015 ____________ _____________ 2015 ____________ ____________
B. Prepare the
journal entries for 2013, 2014 and 2015 for % of completion and completed
contract.
C. Assume
instead that Bentley determines their total contract costs will be $6,200,000
in 2014 due to massive overruns. Describe
the impact on your journal entries for 2014.
