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  • Conxtruction Ontract

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    Alexandrite
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    This document discusses accounting methods for construction projects, including: 1) The percentage of completion method, which recognizes revenue and costs over time based on the percentage of the project completed. 2) The zero profit method, which recognizes no profit until the project is complete to avoid overstating revenue and profits. 3) Examples calculating construction in progress, costs incurred, billings, and estimated costs to complete for several projects between 2016-2018.

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    This document discusses accounting methods for construction projects, including: 1) The percentage of completion method, which recognizes revenue and costs over time based on the percentage of the project completed. 2) The zero profit method, which recognizes no profit until the project is complete to avoid overstating revenue and profits. 3) Examples calculating construction in progress, costs incurred, billings, and estimated costs to complete for several projects between 2016-2018.

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    12 views5 pages

    Conxtruction Ontract

    Uploaded by

    Alexandrite
    This document discusses accounting methods for construction projects, including: 1) The percentage of completion method, which recognizes revenue and costs over time based on the percentage of the project completed. 2) The zero profit method, which recognizes no profit until the project is complete to avoid overstating revenue and profits. 3) Examples calculating construction in progress, costs incurred, billings, and estimated costs to complete for several projects between 2016-2018.

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    © All Rights Reserved
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    of 5

    1D

    2A
    3A
    4D
    A Construction in progress - percentage method

    Revenue for the year


    Revenue recognized from last year
    Cost of construction
    Gross profit of the year
    progress billing
    construction in progress-2017

    B Construction in progress - Zero profit method

    Cost Incurred - 2017


    Cost Incurred - 2018
    Construction in progress
    Billing to client
    Construction in progress net of billing

    Cc tOTAL CONTRACT PRICE


    COST INCURRED TO DATE
    550,000.00
    75,000.00
    (600,000.00)
    25,000.00
    550,000.00
    575,000.00

    (600,000.00)
    (75,000.00)
    (675,000.00)
    550,000.00
    (125,000.00)

    975,000.00 Progress Billing-2018 275,000.00


    (1,050,000.00) Construction in progress net of b (125,000.00)
    (75,000.00) Construction in progress net of b (125,000.00)
    25,000.00 25,000.00
    (50,000.00)
    2016 2017 2018
    Construction in Progress 441,000.00 ? ?
    Estimated cost to complete ? ? -
    Cost Incurred 425,250.00 969,000.00 675,750.00
    Excess of construction in progress over billing (84,000.00) (330,750.00) -

    A. Estimated cost to complete-2016


    Contract Price
    Cost incurred
    Excess of construction in progress over billing
    Estimated Cost to complete

    B. Realized Profit/Loss-2017 Total contract price


    Cost incurred
    Estimated total contract cost
    Realized profit/loss

    Construction in progress Contract Price


    Cost incurred
    Excess of construction in progress over billing
    Estimated Cost to complete
    Cost Incurred
    Estimated Total contract cost
    Percentage of Completion

    Gross profit earned


    Gross Profit earned in previous year
    Construction in progress
    2,100,000.00
    (425,250.00)
    ess over billing (84,000.00)
    1,590,750.00

    2,100,000.00
    (969,000.00)
    (800,250.00)
    330,750.00

    2,100,000.00
    (969,000.00)
    ess over billing (330,750.00)
    800,250.00
    969,000.00
    1,769,250.00
    54.77%

    1,480,898.37
    (441,000.00)
    1,039,898.37

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