Documente Academic
Documente Profesional
Documente Cultură
Construction began in 2015 and was completed in 2016. Data relating to the
contract are summarized below:
JR Builders uses the percentage of completion method as the basis for income
recognition.
For the years ended December 31, 2015, and 2016 respectively, JR Builders should
report recognized 2016 revenue of:
SOLUTION:
2015 2016
Contract price 400,000 400,000
Multiply by: percentage of completion (a) 66 2/3% 100%
Recognized revenue to date 266,667 400,000
Less: Recognized revenue in prior year - 266,667
Recognized revenue each year 266,667 133,333
(a)
Percentage of completion 2015 2016
Cost incurred each year 200,000 110,000
Add: Cost incurred in prior year - 200,000
Cost incurred to date 200,000 310,000
Add: Estimated costs of complete 100,000 -
Total estimated costs 300,000 310,000
Percentage of completion:
Costs incurred to date/ Total estimated costs 66 2/3% 100%
Imona Builders, Inc. employs the cost to cost method in determining the percentage of
completion for revenue recognition. The companys records show the following information on a
recently completed project for a contract price of 5,000,000.
Solution:
Therefore, the traditional formula to compute the % of the completion would be as follows:
% of Completion = Cost Incurred to date 2015 divided by total estimated cost 2015
60 = 2,550,000/TEC TEC = 4,250,000