Explore BrainMass

Explore BrainMass

    Recognition of Profits on long term contracts

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    I am studying for a test that will have the following type of problems listed. I would like to use these as examples to follow in the course book. I pulled up similar topics on the internet but it does not apply to academics

    4. (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 $400,000 $935,000 $1,070,000
    date
    Estimated costs to 600,000 165,000 -0-
    complete
    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.

    © BrainMass Inc. brainmass.com March 4, 2021, 6:40 pm ad1c9bdddf
    https://brainmass.com/business/revenue-recognition-principle/recognition-of-profits-on-long-term-contracts-55764

    Solution Preview

    Hi there,

    Please see the attached Excel spreadsheet.

    Percentage of Completion Method--under the percentage of completion method the taxpayer recognizes a portion of the contract price as income each taxable year based on ...

    $2.49

    ADVERTISEMENT