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  • Total Cost $15,000,000

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    Arianne Shae Domingo
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    The document outlines a construction project to build a bridge awarded to StrongBridges Ltd for $20 million over 3 years. The estimated costs are $15 million and expected profit is $5 million. It provides the annual project costs incurred, billings, cash collected and % completed. Revenues are recognized using the percentage of completion method, resulting in total revenue of $20 million and gross profit of $5 million over the 3 years. Journal entries are provided to record the transactions each year under this method.

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    The document outlines a construction project to build a bridge awarded to StrongBridges Ltd for $20 million over 3 years. The estimated costs are $15 million and expected profit is $5 million. It provides the annual project costs incurred, billings, cash collected and % completed. Revenues are recognized using the percentage of completion method, resulting in total revenue of $20 million and gross profit of $5 million over the 3 years. Journal entries are provided to record the transactions each year under this method.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Download as xlsx, pdf, or txt
    136 views4 pages

    Total Cost $15,000,000

    Uploaded by

    Arianne Shae Domingo
    The document outlines a construction project to build a bridge awarded to StrongBridges Ltd for $20 million over 3 years. The estimated costs are $15 million and expected profit is $5 million. It provides the annual project costs incurred, billings, cash collected and % completed. Revenues are recognized using the percentage of completion method, resulting in total revenue of $20 million and gross profit of $5 million over the 3 years. Journal entries are provided to record the transactions each year under this method.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 4

    Domingo, Arianne Shae S.

    BSA-3B

    StrongBridges Ltd. was awarded a $20 million contract to build a bridge. The estimated time to complete the projec
    years, with an estimated cost of $15 million. Assuming that the cost estimates do not change, the project is expecte
    $5 million in profit. The following is a schedule on the project:

    2018 2019 2020


    costs incurred (cumulative) $5,000,000.00 $7,000,000.00 $15,000,000.00
    estimated total costs $15,000,000.00 $15,000,000.00 $15,000,000.00
    billings $6,000,000.00 $6,000,000.00 $8,000,000.00
    cash collected $5,000,000.00 $7,000,000.00 $8,000,000.00
    % completed 33% 47% 100%

    Notes:

    Costs Incurred is the costs incurred to build the bridge as estimated by the company’s engineer.
    Billings are the amount of money StrongBridges Ltd. billed for the construction of the bridge.
    Billings amount is set by the contract.
    Cash Collected is the amount of money StrongBridges Ltd. received for the construction of the
    bridge. The variation in billings and cash collected is due to timing differences.
    % Completed is determined by the percentage completion formula.

    For the schedule above, revenues recognized under the percentage of completion method:

    Year 2018: 33% completed. Revenue recognized = 33% x $20 million (contract price) = $6,600,000
    Year 2019: 47% completed. Revenue recognized = 47% x $20 million (contract price) – $6.6 million (previously recognized) =
    Year 2020: 100% completed. Revenue recognized = 100% x $20 million (contract price) – $6.6 million – $2.8 million (previousl
    Total Revenue = $20,000,000

    Year 2020: $8,000,000


    Total Cost = $15,000,000

    Profit recognized under the percentage of completion method:

    Year 2018: $6,600,000 – $5,000,000 = $1,600,000


    Year 2019: $2,800,000 – $2,000,000 = $800,000
    Year 2020: $10,600,000 – $8,000,000 = $2,600,000
    Gross Profit = $5,000,000
    JOURNAL ENTRIES
    2018 Dr Cr 2019
    CIP $5,000,000.00 CIP
    Cash $5,000,000.00 Cash

    A/R $6,000,000.00 A/R


    Billing $6,000,000.00 Billing

    Cash $5,000,000.00 Cash


    A/R $5,000,000.00 A/R

    Construction exp. $5,000,000.00 Construction exp.


    CIP $1,600,000.00 CIP
    Revenue $6,600,000.00 Revenue
    d time to complete the project is three (3)
    hange, the project is expected to generate

    llion (previously recognized) = $2,800,000


    million – $2.8 million (previously recognized) = $10,600,000
    Dr Cr 2020 Dr Cr
    $2,000,000.00 CIP $8,000,000.00
    $2,000,000.00 Cash $8,000,000.00

    $6,000,000.00 A/R $8,000,000.00


    $6,000,000.00 Billing $8,000,000.00

    $7,000,000.00 Cash $8,000,000.00


    $7,000,000.00 A/R $8,000,000.00

    $2,000,000.00 Construction exp. $8,000,000.00


    $800,000.00 CIP $2,600,000.00
    $2,800,000.00 Revenue $10,600,000.00
    Billing $20,000,000.00
    CIP $20,000,000.00

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