Question 6: Percentage of Completion Method (11 marks) Flames Corp contracted to build a bridge for

Question 6: Percentage of Completion Method (11 marks)

Flames Corp contracted to build a bridge for $5,000,000 Construction began in

2017 and was completed in 2018 Data relating to the construction are:

2017 2018

Costs incurred $1,620,000 $1,400,000

Estimated costs to complete 1,380,000 —

Required:

Using the percentage-of-completion method and the cost-to-cost basis, refer to BE6-

30, E6-30, study guide E6-6 as a guide

a) How much revenue should be reported for 2017? Show your calculation

b) Prepare the journal entry to record progress billings of $1,700,000 during 2017

c) Prepare the journal entry to record the revenue and gross profit for 2017

d) How much gross profit should be reported for 2018? Show your calculation

 

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