Class notes
Long Term Contract
- Course
- MOS 3360
- Institution
- University Of Western Ontario (UWO )
Long term contract example
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EXERCISE 6.35 (Appendix 6A)*E6.35 ~ ' 1A) (Recognition ofR~venue on Long-Te?TI Contract an~ Entries) Hamilton Construction
Companv uses the percentage-of-completion method of accountmg. In 202~,.Hamdton began work under a _
cancellable contract #E2-D2, whkh provided for a contract pr~ of $ 2,2 mdhon. Other details follow: non
Prv~,rv,AL 2023
2024
Costs incurred during the year , , 640,6QO~ _!1,£5~00~0
Estimated costs to complete, as at December 31 960,000 -0-
Billings during the year (non-refundable) 420,000 1,780,000
Collections during the year 350,000 1,500,000
Instructions
a. How mud1 re\'enue should be recognized in 2023? In 2024?
b. Assuming the same facts as those above except that Hamilton uses the completed-contract method of accounting h
much revenue should be recognized in 2024? • ow
c. Prepare a complete set of journal entries for 2023 (using the percentage-of-completion method).
(a) Percentage-of-Completion
I
)
2~z~ 20AZ'f
,:::
Costs to date (A) \l.\ '2S~ +& '{(R5'6>
62to,QC5::; -:, 2-0C5a5u
Estimated costs to complete
Estimated total costs (B)
+q1011~ t -
IJ bQ OJO()t:l "2,,0.(~o::0
Estimated percentage complete (C = A/B) ~ '() •/.
~.¢> ::. too~/.
\ ll-<>0
Contract price (D) ~~
~
'2, ?__ ,O'o ,Oclc:i l- 7,,'157) cPO ]x
::.
Revenue to date (C x D)
'l_,J,--00 ~
Less: Revenue recognized in prior year(s)
X O·/,f ~to~ 41--oq~ D
- •t7 ~~()~
Revenue recognize in current year
<2.io 66U / l iZ. 2o,~
Less: Construction expenses (costs for year) - -
~tt12.s;'?J(50
"b ~ o Z5°C'.5c) ~ ·, ?
Gross profit {loss) for the current year
'Z.}\i0) ~ \
( lo50"m) ')
J
T6fJ- d1V-SJ pro-h+ )
-:; 2 ~ o-c560 t ( IO 560()
- 6D
(b) Completed-Contract Method fi 5 P[
202 3 201 lJ
2- 2., )2-e,a)CX:D
0
1Jo t ~('.5QZ)
~ // (/
-0- .
0 l sS)~
I
_,)
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