60.1K

Verified Solution

Link Copied!

Costs incurred to date Estimated costs to complete $ 600,000 3,150,000 Q credit balance of $215,000. *BE6.36 (LO 10, 12, 14) During 2023, Darwin Corporation started a construction job with a contract price of $4.2 million. Darwin ran into severe technical difficulties during construction but managed to complete the job in 2025. The contract is non-cancellable. Under the terms of the contract, Darwin sends billings as revenues are earned. Billings are non-refundable. The following information is available: 2023 2024 2025 $2,100,000 2,100,000 59% A $4,100,000 -0- a. Calculate the amount of gross profit that should be recognized each year under the percentage-of-completion method. b. Prepare the year-end journal entries for 2024 to record revenues and expenses from the contract, assuming the percentage-of-completion method is used. Explain the treatment of the reduction in overall gross profit under the percentage-of-completion method. c. Calculate the amount of gross profit or loss that should be recognized each year under the completed-contract method. Explain the treatment of losses under the completed-contract method.

*BE6.36 (LO 10, 12, 14) During 2023, Darwin Corporation started a construction job with a contract price of $4.2 million. Darwin ran into severe technical difficulties during construction but managed to complete the job in 2025. The contract is non-cancellable. Under the terms of the contract, Darwin sends billings as revenues are earned. Billings are non-refundable. The following information is available: 202320242025 a. Calculate the amount of gross profit that should be recognized each year under the percentage-of-completion method. b. Prepare the year-end journal entries for 2024 to record revenues and expenses from the contract, assuming the percentage-of-completion method is used. Explain the treatment of the reduction in overall gross profit under the percentage-of-completion method. c. Calculate the amount of gross profit or loss that should be recognized each year under the completed-contract method. Explain the treatment of losses under the completed-contract method

Answer & Explanation Solved by verified expert

See Answer