Question 2 (30 marks) On February 1, 2017, Mar Contractors agreed to construct a building...
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Question 2 (30 marks) On February 1, 2017, Mar Contractors agreed to construct a building at a contract price of $15,400,000. Mar initially estimated total construction costs would be $12,000,000 and the project would be finished in 2020. Information relating to the costs and billings for this contract during 2017-2019 is as follows: 2017 2018 2019 Total costs incurred to date $4,500,000 $7,920,000 $13,800,000 Estimated costs to complete $7,500,000 $5,280,000 $1,800,000 Customer billings to date $6,600,000 $12,000,000 $13,800,000 Collections to date $6,000,000 $10,500,000 $13,500,000 Required (a) Compute the gross profit to be recognized in 2017, 2018 and 2019 under percentage of completion method. (6 marks) (b) Prepare all required journal entries for Mar Contractors in 2018 and 2019 under percentage of completion method. (15 marks) (c) Compute the gross profit to be recognized in 2017, 2018 and 2019 under cost recovery method. (3 marks) (d) Prepare all required journal entries for revenue, expense and gross profit in 2018 and 2019 under percentage of cost recovery method. Entries for cost of construction, billing and collection are not required. (6 marks)
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