1. 30 pts In 2016, the Roth Construction Company entered into a contract to cons
ID: 2567684 • Letter: 1
Question
1. 30 pts In 2016, the Roth Construction Company entered into a contract to construct a road for Orange County for $10,000,000. The road was completed in 2018. Information related to the contract is as follows 2016 2017 2018 S2,400,000 $3,600,000 $2,200,000 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 5,600,000 2,000,000 2,000,000 4,000,000 4,000,000 1,800,000 3,600,000 4,600,000 Roth recognizes revenue over time according to percentage of completion. Required 1. Calculate the amount of revenue and gross profit to be recognized in 2. Prepare all necessary journal entries for each of the years (credit 3. Prepare a partial balance sheet for 2016 and 2017 showing any items each of the three years. "various accounts" for construction costs incurred) related to the contract. Indicate whether any of the amounts shown are contract assets or contract liabilities. 4. Calculate the amount of revenue and gross profit to be recognized in each of the three years assuming the following costs incurred and costs to complete information 20162017 2,400,000 $3,800,000 $3,200,000 5,600,00O 3,100,000 2018 Costs incurred during the year Estimated costs to complete as of year-endExplanation / Answer
Roth Construction Company 2016 2017 2018 Cost incurred during the year $ 2,400,000.00 $ 3,600,000.00 $ 2,200,000.00 Estimated cost to complete $ 5,600,000.00 $ 2,000,000.00 $ - Billing during the year $ 2,000,000.00 $ 4,000,000.00 $ 4,000,000.00 Cash Collections during the year $ 1,800,000.00 $ 3,600,000.00 $ 4,600,000.00 Ans 1) 2016 2017 2018 Contract Price $ 10,000,000.00 $ 10,000,000.00 $ 10,000,000.00 Actual Cost to date $ 2,400,000.00 $ 6,000,000.00 $ 8,200,000.00 Estimated cost to complete $ 5,600,000.00 $ 2,000,000.00 Total estimated cost $ 8,000,000.00 $ 8,000,000.00 $ 8,200,000.00 Estimated Gross Profit/loss in 2018 $ 2,000,000.00 $ 2,000,000.00 $ 1,800,000.00 Revenue Recognition=((Actual Cost to date)/Total Estimated cost)*Contract Price-Revenue Recognised earlier Years Year 2016 2017 2018 Revenue Recognition=($2400000/8000000)*$10000000 for 2016,($6000000/8000000)*$10000000-$200000 for 2017,($8200000/$8200000)*10000000-$200000-$200000 for 2018 3000000 4500000 2500000 Gross Profit(Loss) Recognition (Actual Cost to date/Total Estimated cost)*Estimated Gross Profit(Loss)-Gross Profit(loss) recognised earlier 2016 2017 2018 ($2400000/$8000000)*$2000000 for 2016,($6000000/$8000000)*$2000000 -$2000000 for 2017,($1800000-$600000-$900000) for 2018 600000 900000 300000 Ans 2) Journal Entries in 2016 Date Particular Amount (DR) Amount (CR) 2016 Constuction in Progress $ 2,400,000.00 To Various Accounts $ 2,400,000.00 (Being Amount of cost incurred on construction Contract) 2016 Accounts Receivable $ 2,000,000.00 To Billing on construction contract $ 2,000,000.00 (Being amount of bill due for contract) 2016 Cash $ 1,800,000.00 To Accounts Receivable $ 1,800,000.00 (Being amount of cash received from accounts receivable) 2016 Cost of Construction $ 2,400,000.00 To Revenue from long term contract $ 2,400,000.00 Journal Entries in 2017 Date Particular Amount (DR) Amount (CR) 2017 Constuction in Progress $ 3,600,000.00 To Various Accounts $ 3,600,000.00 (Being Amount of cost incurred on construction Contract) 2017 Accounts Receivable $ 4,000,000.00 To Billing on construction contract $ 4,000,000.00 (Being amount of bill due for contract) 2017 Cash $ 3,600,000.00 To Accounts Receivable $ 3,600,000.00 (Being amount of cash received from accounts receivable) 2017 Construction in Progress Cost of Construction $ 3,600,000.00 To Revenue from long term contract $ 3,600,000.00 Journal Entries in 2018 Date Particular Amount (DR) Amount (CR) 2018 Constuction in Progress $ 2,200,000.00 To Various Accounts $ 2,200,000.00 (Being Amount of cost incurred on construction Contract) 2018 Accounts Receivable $ 4,000,000.00 To Billing on construction contract $ 4,000,000.00 (Being amount of bill due for contract) 2018 Cash $ 4,600,000.00 To Accounts Receivable $ 4,600,000.00 (Being amount of cash received from accounts receivable) 2018 Construction in Progress=($4000000-$2200000) $ 1,800,000.00 Cost of Construction $ 2,200,000.00 To Revenue from long term contract $ 4,000,000.00 Partial Balance Sheet Ans 3) 2016 2017 Accounts Receivable=($2000000-$1800000) in 2016,($200000+$4000000-$3600000) in 2017 $ 200,000.00 $ 600,000.00 Construction in Progress($2400000+$3600000) in 2017 $ 2,400,000.00 $ 6,000,000.00 Less: Billing=($2000000+$4000000) in 2017 $ 2,000,000.00 $ 6,000,000.00 Cost in Excess of billing $ 400,000.00 $ - 2016 2017 2018 Ans 4) Cost incurred during the year $ 2,400,000.00 $ 3,800,000.00 $ 3,200,000.00 Estimated cost to complete $ 5,600,000.00 $ 3,100,000.00 $ - $ 2,016.00 $ 2,017.00 $ 2,018.00 Contract Price $ 10,000,000.00 $ 10,000,000.00 $ 10,000,000.00 Actual Cost to date $ 2,400,000.00 $ 6,200,000.00 $ 9,400,000.00 Estimated cost to complete $ 5,600,000.00 $ 3,100,000.00 Total estimated cost $ 8,000,000.00 $ 9,300,000.00 $ 9,400,000.00 Estimated Gross Profit/loss in 2018 $ 2,000,000.00 $ 700,000.00 $ 600,000.00 Year 2016 2017 2018 Actual cost to date for 2016 $ 2,400,000.00 $ 2,400,000.00 $ 2,400,000.00 Actual cost to date for 2017 $ 3,800,000.00 $ 3,800,000.00 Actual cost to date for 2018 $ 3,200,000.00 Actual cost to date $ 2,400,000.00 $ 6,200,000.00 $ 9,400,000.00
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