Example on completion method, Accounting Basics

Assignment Help:

Q. Example on completion method?

Assume that by the end of the first year (2010) the company had incurred actual construction costs of USD 30 million. These costs are 75 percent of the total approximate construction costs (USD 30 million/USD 40 million = 75 percent). In the percentage-of-completion method the firm would use the 75 percent figure to assign revenue to the first year. In 2011 it acquires another USD 6 million of construction costs. In 2012 it earns the final USD 4 million of construction costs. The amount of revenue to assign to every year is as follows

52_Example on completion method.png

The sum of gross margin to recognize in each year is as follows

1725_Example on completion method1.png

This company would subtract other costs incurred in the accounting period such as general and administrative expenses from gross margin to determine net income. For example assuming general and administrative expenses were USD 100000 in 2010 net income would be (USD 3000000 - USD 100000) = USD 2900000.


Related Discussions:- Example on completion method

Perpetual Inventory Systems, How do you do journal entries for an item boug...

How do you do journal entries for an item bought on credit and then later returned and the total selling price was 4,275.

Purpose of adjusting entries, Q. Purpose of adjusting entries? In this ...

Q. Purpose of adjusting entries? In this section we exemplify each of the four types of adjusting entries asset/expense liability/revenue, asset/revenue and liability/expense.

Role of government in a mixed economy, Government: In a mixed economy this...

Government: In a mixed economy this is seems to be the duty of the Government to direct the operation of the economic system in that a way which it subseries the general good. Con

Accounting for investments, Contain the relevant authoritative literature o...

Contain the relevant authoritative literature on accounting for investments in held-to-maturity securities using the FASB's Codification Research System. What is the specific citat

Ethical perspective - world auto parts corporation, John Bentley is the chi...

John Bentley is the chief financial officer for World Auto Parts Corporation the company buys approximately USD 500 million of auto parts every year from small suppliers all over t

Calculate the gross margin percentage, Q. Calculate the gross margin percen...

Q. Calculate the gross margin percentage? Calculate the gross margin percentage by using the following formula Grossmargin percentage = Grossmargin/Net sales To show th

BRS, what is the BRS

what is the BRS

What is intangible assets, Q. What is Intangible Assets? Intangible Ass...

Q. What is Intangible Assets? Intangible Assets are items likecopyrights, patents, licenses, trademarks, franchises andother kinds of rights or things of value to a company tha

Overestimate the profitability of the business, In Exhibit the accurately s...

In Exhibit the accurately stated ending inventory for the year 2009 is USD 35000. As a result Allen has a gross margin of USD 135000 as well as net income of USD 50000. The stateme

Concepts of accounting, What are the implications of applying accounting co...

What are the implications of applying accounting concepts wrongly?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd