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  • Percentage-of-Completion Method Percentage-of-Completion Method

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    Nick
    8 views9 pages
    This document discusses and provides illustrations of the percentage-of-completion and cost recovery methods for recognizing revenue and income on long-term construction contracts. It includes journal entries, financial statement presentations, and examples of applying each method to profitable and unprofitable contracts. Key aspects covered are estimating costs to complete, calculating percentage complete, determining revenue and income recognized in each period, and balance sheet presentation of contract assets and liabilities.

    Original Description:

    For Accounting ACC2002

    Original Title

    Lecture 3 Template

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    This document discusses and provides illustrations of the percentage-of-completion and cost recovery methods for recognizing revenue and income on long-term construction contracts. It includes journal entries, financial statement presentations, and examples of applying each method to profitable and unprofitable contracts. Key aspects covered are estimating costs to complete, calculating percentage complete, determining revenue and income recognized in each period, and balance sheet presentation of contract assets and liabilities.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    8 views9 pages

    Percentage-of-Completion Method Percentage-of-Completion Method

    Uploaded by

    Nick
    This document discusses and provides illustrations of the percentage-of-completion and cost recovery methods for recognizing revenue and income on long-term construction contracts. It includes journal entries, financial statement presentations, and examples of applying each method to profitable and unprofitable contracts. Key aspects covered are estimating costs to complete, calculating percentage complete, determining revenue and income recognized in each period, and balance sheet presentation of contract assets and liabilities.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 9

    Percentage-of-Completion Method

    Illustration 1 using percentage-of-completion method


    Costs incurred to date

    Estimated cost to complete


    Est. total contract costs

    Est. percentage complete


    Contract price

    Revenue recognizable

    Rev. recognized prior year


    Rev. recognized currently
    Costs incurred currently

    Income recognized currently

    Lecture
    3T-1

    20X1

    20X2

    20X3

    Percentage-of-Completion Method

    Journal Entries

    Lecture
    3T-2

    20X1

    20X2

    20X3

    Percentage-of-Completion Method

    Financial Statements Presentation

    Income Statement

    Revenue on contracts
    Cost of construction
    Gross profit

    Balance Sheet

    Current assets:
    Current liabilities:
    Lecture
    3T-3

    20X1

    20X2

    20X3

    Percentage-of-Completion Method

    Illustration 2 Loss on Profitable Contract


    Costs incurred to date

    Estimated cost to complete


    Est. total contract costs

    Est. percentage complete


    Contract price

    Revenue recognizable

    Rev. recognized prior year


    Rev. recognized currently
    Costs incurred currently

    Income recognized currently

    Lecture
    3T-4

    20X1

    20X2

    20X3

    Percentage-of-Completion Method

    Illustration 3 Loss on Unprofitable Contract


    Costs incurred to date

    Estimated cost to complete


    Est. total contract costs

    Est. percentage complete


    Contract price

    Revenue recognizable

    Rev. recognized prior year


    Rev. recognized currently
    Costs incurred currently

    Income recognized currently

    Lecture
    3T-5

    20X1

    20X2

    20X3

    Cost Recovery Method

    Illustration 1 using cost recovery method


    Costs incurred to date

    Estimated cost to complete


    Est. total contract costs

    Est. percentage complete


    Contract price

    Revenue recognizable

    Rev. recognized prior year


    Rev. recognized currently
    Costs incurred currently

    Income recognized currently

    Lecture
    3T-6

    20X1

    20X2

    20X3

    Cost Recovery Method

    Journal Entries

    Lecture
    3T-7

    20X1

    20X2

    20X3

    Cost Recovery Method

    Financial Statements Presentation

    Income Statement

    Revenue on contracts
    Cost of construction
    Gross profit

    Balance Sheet

    Current assets:
    Current liabilities:
    Lecture
    3T-8

    20X1

    20X2

    20X3

    Cost Recovery Method

    Illustration 3 using cost recovery method


    Costs incurred to date

    Estimated cost to complete


    Est. total contract costs

    Est. percentage complete


    Contract price

    Revenue recognizable

    Rev. recognized prior year


    Rev. recognized currently
    Costs incurred currently

    Income recognized currently

    Lecture
    3T-9

    20X1

    20X2

    20X3

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