Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

Contract Revenue Accounting

VIEWS: 6 PAGES: 13

Contract Revenue Accounting document sample

More Info
									   Acct 414                                  8/15/2011                       Prof. Teresa Gordon

Garfield Construction Inc. - Construction Accounting

Garfield Construction Inc. (GCI) has contracted to build hydroelectric plant on
the Palouse River. The project will take three years to complete. The contract
price is $10,000,000. CCC can bill the State of Washington during construction
on a formula basis. Both parties are expected to fulfill their obligations under
the contract.

Total contract revenue:             10,000,000
                                      2011             2012           2013           Totals
Construction costs incurred
during year                          2,000,000         3,100,000     3,300,000      8,400,000
Progress billings for yr             1,500,000         4,100,000     4,400,000     10,000,000
Collections during year              1,000,000         4,200,000     4,800,000     10,000,000
Est costs to complete                6,000,000         3,400,000             0

                                      2011             2012           2013
Cost incurred to-date
Estimated total cost

Percentage of completion


Construction revenue to-date
Construction revenue for year
Construction cost for year
Gross profit for year
Gross profit recognized to-date




   ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls      -1-                                    Problem
   Acct 414                                                                 8/15/2011                                         Prof. Teresa Gordon
Garfield Construction Inc. - Construction Accounting
JOURNAL ENTRIES                                             2011                        2012                      2013                 2014
PERCENTAGE OF COMPLETION METHOD
(US GAAP or IFRS)                                      DR          CR           DR             CR           DR           CR      DR
Construction in Progress
 Accts Pay, Cash, etc.

Accounts Receivable
  Partial Billings

Cash
 Accounts Receivable




T-accounts                                       Construction in progress                      Partial billings                Accounts Receivable




   ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls                                    -2-                                                    JEs-% blank
            Acct 414                                   8/15/2011   Prof. Teresa Gordon

     2014

             CR




counts Receivable




            ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls      -3-             JEs-% blank
    Acct 414                                                               8/15/2011                                       Prof. Teresa Gordon
Garfield Construction Inc. - Construction Accounting
JOURNAL ENTRIES                                             2011                2012                        2013               2014
Completed contract method (US
GAAP only)                                             DR          CR     DR           CR              DR          CR    DR            CR
Construction in Progress
 Accts Pay, Cash, etc.

Accounts Receivable
  Partial Billings

Cash
 Accounts Receivable




T-accounts                                     Construction in progress                 Partial billings                Accounts Receivable




    ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls                                   -4-                                               JEs-CC-blank
    Acct 414                                                               8/15/2011                                       Prof. Teresa Gordon
Garfield Construction Inc. - Construction Accounting
JOURNAL ENTRIES                                             2011                2012                        2013                2014
Zero Profit Method (IFRS only)                         DR          CR     DR           CR              DR          CR    DR             CR
Construction in Progress
 Accts Pay, Cash, etc.

Accounts Receivable
  Partial Billings

Cash
 Accounts Receivable




T-accounts                                     Construction in progress                 Partial billings                Accounts Receivable




    ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls                                   -5-                                        JEs-zero profit (blank)
  Acct 414                                8/15/2011                   Prof. Teresa Gordon

Garfield Construction Inc. - Construction Accounting
Total contract revenue:                10,000,000
                                         2011        2012          2013
Construction costs
 incurred during the year               2,000,000    3,100,000     3,300,000
Progress billings during yr             1,500,000    4,100,000     4,400,000
Collections during year                 1,000,000    4,200,000     4,800,000
Estimated costs to complete             6,000,000    3,400,000             0
Percentage of completion                   25.00%       60.00%       100.00%
                                   PARTIAL SOLUTION
Yr end balances
 CIP-% of completion                    2,500,000    6,000,000    10,000,000
 CIP-completed contract & zero
profit                                  2,000,000    5,100,000     8,400,000
 Progress Billings                      1,500,000    5,600,000    10,000,000
 A/R                                      500,000      400,000             0


SOLUTION - PERCENTAGE OF COMPLETION METHOD
Cost incurred to-date        2,000,000   5,100,000                 8,400,000
ESTIMATED TOTAL COST         8,000,000   8,500,000                 8,400,000
% of completion                 25.00%      60.00%                   100.00%

Constr Rev to-date                  2,500,000         6,000,000   10,000,000
Construction Revenue for yr         2,500,000         3,500,000    4,000,000
Construction Cost                   2,000,000         3,100,000    3,300,000
Gross Profit Construction             500,000           400,000      700,000
PROJECTED TOTAL PROFIT              2,000,000         1,500,000    1,600,000
G.P. RECOGNIZED TO-DATE               500,000           900,000    1,600,000




  ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls      -6-                              Solution
   Acct 414                               8/15/2011                 Prof. Teresa Gordon

BALANCE SHEET PRESENTATION         2011               2012       2013

Percentage of Completion:
CURRENT ASSETS
 Constr Costs in Excess
  of related billings              1,000,000           400,000

CURRENT LIABILITIES
 Constr Billings in excess
  of related costs

Completed Contract
CURRENT ASSETS
 Constr Costs in Excess
  of related billings               500,000

CURRENT LIABILITIES
 Constr Billings in excess
  of related costs                                     500,000




   ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls    -7-                             Solution
 Acct 414                              8/15/2011   Prof. Teresa Gordon




      totals

      8,400,000
     10,000,000
     10,000,000




OK



OK
  10,000,000
   8,400,000
   1,600,000

OK




 ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls   -8-               Solution
Acct 414                              8/15/2011   Prof. Teresa Gordon




ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls   -9-               Solution
    Acct 414                                                                       8/15/2011                                                        Prof. Teresa Gordon

Garfield Construction Inc. - Construction Accounting                             solution
JOURNAL ENTRIES                                              2011                              2012                             2013                              2014
PERCENTAGE OF COMPLETION METHOD                        DR            CR            DR                 CR                DR              CR           DR
Construction in Progress                               2,000,000                   3,100,000                             3,300,000                            -
 Accts Pay, Cash, etc.                                               2,000,000                        3,100,000                         3,300,000

Accounts Receivable                                    1,500,000                   4,100,000                             4,400,000                            -
  Partial Billings                                                   1,500,000                        4,100,000                         4,400,000

Cash                                                   1,000,000                   4,200,000                             4,800,000                            -
 Accounts Receivable                                                 1,000,000                        4,200,000                         4,800,000

Construction Costs                                     2,000,000                   3,100,000                             3,300,000                            -
Construction in Progress                                 500,000                     400,000                               700,000                            -
 Construction Revenue                                                2,500,000                        3,500,000                         4,000,000

Closing Entry
Partial Billings                                                                                                        10,000,000
 Construction in Progress                                                                                                              10,000,000




T-accounts                                        Construction in progress                                 Partial billings                          Accounts Receivable
                                                    2,000,000                                                            1,500,000                  1,500,000
                                                      500,000             -
                    Ending balance 1999             2,500,000                                                          1,500,000                      500,000
                                                    3,100,000                                                          4,100,000                    4,100,000
                                                      400,000             -
                    Ending balance 2000             6,000,000                                                          5,600,000                      400,000
                                                    3,300,000                                                          4,400,000                    4,400,000
                                                      700,000
                    Ending balance 2001            10,000,000                                                        10,000,000                           -
                                                          -                                                                 -                             -
                                                          -
                    Ending balance 2002            10,000,000                                                        10,000,000                           -
                                                          -                                                                 -                             -
                                                          -               -
              Pre-closing balance, 2003            10,000,000                                                        10,000,000                           -




    ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls                                          - 10 -                                                                      JEs-% (sol)
             Acct 414                                   8/15/2011   Prof. Teresa Gordon


      2014
               CR


                         -



                         -



                         -




                         -




ccounts Receivable

             1,000,000


             4,200,000


             4,800,000


                     -


                     -




             ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls     - 11 -            JEs-% (sol)
    Acct 414                                                                           8/15/2011                                                       Prof. Teresa Gordon

Garfield Construction Inc. - Construction Accounting                               solution
JOURNAL ENTRIES                                                 2011                           2012                            2013                           2014
COMPLETED CONTRACT METHOD                              DR               CR           DR               CR             DR                CR            DR              CR
Construction in Progress                           2,000,000                 -       3,100,000              -        3,300,000               -            -               -
 Accts Pay, Cash, etc.                                   -             2,000,000           -          3,100,000            -           3,300,000          -               -
                                                         -                   -             -                -              -                 -            -               -
Accounts Receivable                                1,500,000                 -       4,100,000              -        4,400,000               -            -               -
  Partial Billings                                       -             1,500,000           -          4,100,000            -           4,400,000          -               -
                                                         -                   -             -                -              -                 -            -               -
Cash                                               1,000,000                 -       4,200,000              -        4,800,000               -            -               -
 Accounts Receivable                                     -             1,000,000           -          4,200,000            -           4,800,000          -               -

Estimated loss on construction contract                     -                              -                               -                              -
 Construction in progress                                                    -                              -                                -                            -

Closing Entry
Partial Billings                                                                                                    10,000,000
 Construction revenue                                                                                                                 10,000,000
Construction costs                                                                                                   8,400,000
 Construction in progress                                                                                                              8,400,000



T-accounts                                     Construction in progress                                 Partial billings                            Accounts Receivable
                                                2,000,000                                                            1,500,000                     1,500,000
                                                         0             0                                                                                        1,000,000
                    Ending balance 1999         2,000,000                                                          1,500,000                         500,000
                                                3,100,000                                                          4,100,000                       4,100,000
                                                         0             0                                                                                        4,200,000
                    Ending balance 2000         5,100,000                                                          5,600,000                         400,000
                                                3,300,000                                                          4,400,000                       4,400,000
                                                         0             0                                                                                        4,800,000
                    Ending balance 2001         8,400,000                                                         10,000,000                               0
                                                         0                                                                 0                               0
                                                         0             0                                                                                                0
                    Ending balance 2002         8,400,000                                                         10,000,000                               0
                                                         0                                                                 0                               0
                                                         0             0                                                                                                0
              Pre-closing balance, 2003         8,400,000                                                         10,000,000                               0




    ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls                                               - 12 -                                                                JEs-CC (sol)
    Acct 414                                                                       8/15/2011                                                  Prof. Teresa Gordon

Garfield Construction Inc. - Construction Accounting                           solution
JOURNAL ENTRIES                                             2011                         2012                          2013                           2014
COMPLETED CONTRACT METHOD                              DR           CR           DR             CR             DR             CR            DR               CR
Construction in Progress                           2,000,000             -       3,100,000            -        3,300,000            -             -                -
 Accts Pay, Cash, etc.                                   -         2,000,000           -        3,100,000            -        3,300,000           -                -
                                                         -               -             -              -              -              -             -                -
Accounts Receivable                                1,500,000             -       4,100,000            -        4,400,000            -             -                -
  Partial Billings                                       -         1,500,000           -        4,100,000            -        4,400,000           -                -
                                                         -               -             -              -              -              -             -                -
Cash                                               1,000,000             -       4,200,000            -        4,800,000            -             -                -
 Accounts Receivable                                     -         1,000,000           -        4,200,000            -        4,800,000           -                -

Construction costs                                 2,000,000                     3,100,000                     3,300,000                          -
Construction revenue                                               2,000,000                    3,100,000                     3,300,000                            -

Closing entry
Construction revenue (gross profit)                                                                                           1,600,000
Contr in progress                                                                                                             8,400,000
Partial billings                                                                                              10,000,000




T-accounts                                     Construction in progress                           Partial billings                         Accounts Receivable
                                                2,000,000                                                      1,500,000                  1,500,000
                                                         0                                                                                             1,000,000
                    Ending balance 2011         2,000,000                                                    1,500,000                      500,000
                                                3,100,000                                                    4,100,000                    4,100,000
                                                         0                                                                                             4,200,000
                    Ending balance 2012         5,100,000                                                    5,600,000                      400,000
                                                3,300,000                                                    4,400,000                    4,400,000
                                                         0                                                                                             4,800,000
                    Ending balance 2013         8,400,000                                                   10,000,000                            0
                                                         0                                                           0                            0
                                                         0             0                                                                                       0
                    Ending balance 2014         8,400,000                                                   10,000,000                            0
                                                         0                                                           0                            0
                                                         0             0                                                                                       0
              Pre-closing balance, 2015         8,400,000                                                   10,000,000                            0




    ee3eeffa-4686-4a31-b451-c50b8e83dc8c.xls                                           - 13 -                                                    JEs-zero profit (sol)

								
To top