ACC 421 Week 3
Exercise 18-5 (E18-5) (Analysis of Percentage-of-Completion Financial
Statements) In 2007, Beth Botsford Construction Corp. began construction
work under a 3-year contract. The contract price was $1,000,000. Beth
Botsford uses the percentage-of-completion method for financial
accounting purposes. The income to be recognized each year is based on
the proportion of cost incurred to total estimated costs for completing
the contract. The financial statement presentations relating to this
contract at December 31, 2007, follow.
Balance Sheet
Accounts receivable—construction contract billings $21,500
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500
Income Statement
Income (before tax) on the contract recognized in 2007 $18,200
Instructions
(a) How much cash was collected in 2007 on this contract?
(b) What was the initial estimated total income before tax on this contract?
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