course hero 23 - in previous years 0 200,000 340,000 Gross...

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Exercise 4 During 2007 Pierson Company started a construction job with a contract price of $1,500,000. The job was completed in 2009. The following information is available. 2007 2008 2009 Costs incurred to date 400,000 935,000 1,070,000 Estimated costs to completed 600,000 165,000 0 Billings to date 300,000 900,000 1,500,000 Collections to date 270,000 810,000 1,425,000 a. Computed the amount of gross profit to be recognized each year assuming the percentage of completion method is used. b. Prepare all necessary journal entries for 2008 c. Compute the amount of gross profit to be recognized each year assuming the completed- contract method is used. EXERCISE 4 (20–25 minutes) (a) Gross profit recognized in: 2007 2008 2009 Contract price $1,500,000 $1,500,000 $1,500,000 Costs: Costs to date $400,000 $935,000 $1,070,000 Estimated costs to complete 600,000 1,000,000 165,000 Total estimated profit 500,000 400,000 430,000 Percentage completed to date 40%* 85%** 100% Total gross profit recognized 200,000 340,000 430,000 Less: Gross profit recognized
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Unformatted text preview: in previous years 0 200,000 340,000 Gross profit recognized in current year $ 200,000 $ 140,000 $ 90,000 **$400,000 $1,000,000 **$935,000 $1,100,000 18-17 (b) Construction in Process . ............................................. 535,000 ($935,000 $400,000) Materials, Cash, Payables, etc. . .................... 535,000 Accounts Receivable ($900,000 $300,000) . ........ 600,000 Billings on Construction in Process . .............. 600,000 Cash ($810,000 $270,000). ........................................ 540,000 Accounts Receivable. ........................................... 540,000 Construction Expenses. ............................................... 535,000 Construction in Process . ............................................. 140,000 Revenue from Long-Term Contracts . ............. 675,000* *$1,500,000 X (85% 40%) (c) Gross profit recognized in: 2007 2008 2009 Gross profit $ 0 $ 0 $430,000* *$1,500,000 $1,070,000...
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This note was uploaded on 04/25/2010 for the course BUS 165 C Business 1 taught by Professor Michaelmoore during the Spring '10 term at UC Riverside.

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course hero 23 - in previous years 0 200,000 340,000 Gross...

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