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QUESTION 5.5 (35 marks total) The board of directors for Apache Construction Corp.
$ 2,620,000
$ 1,590,000
$ 1,395,000
Contract costs incurred Estimated additional costs to
Project through 12/31/18 complete contracts
A $ 510,000 $ 120,000
B 130,000 260,000
C 350,000 -0-
D 370,000 290,000
E 320,000 80,000
$ 1,680,000 $ 750,000
1. Each contract is with a different customer.
2. Any work remaining to be done on the contracts is expected to be completed in 2019.
Required1. (16 marks) Prepare a schedule by project, calculating the amount of gross profit (or loss) for the 2018 calendar year, which would be reported under:
a. The completed-contract method.
b. The percentage-of-completion method (based on estimated costs).
2. (6 marks) Prepare the general journal entry to record revenue and gross profit on project B for 2018, assuming that the percentage-of-completion method is used.
3. (10 marks) Indicate the balances that would appear in the statement of financial position at December 31, 2018 for the following accounts for Project D, assuming that the percentage-of-completion method is used.
o Accounts Receivable
o Billings on Construction in Process o Construction in Process
4. (3 marks) How would the balances in the accounts discussed in part 3 above change (if at all) for Project D, if the completed-contract method is used?
