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    Recognition of Profit on Long-Term Contracts

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    (Recognition of Profit on Long-Term Contracts) During 2004 Pierson Company started a construction job with a contract price of $1,500,000. The job was completed in 2006. The following information is available.

    2004 2005 2006
    Costs incurred to date $400,000 $935,000 $1,070,000
    Estimated costs to complete 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

    Instructions

    (a) Compute 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 2005.
    (c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.

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    https://brainmass.com/business/accounting/recognition-profit-long-term-contracts-77902

    Solution Summary

    Computations and journal entries are provided in an Excel attachment.

    $2.19

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