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

What do you mean by bookkeeping, Q. What do you mean by bookkeeping? Ac...

Q. What do you mean by bookkeeping? Accounting is frequently confused with bookkeeping. Bookkeeping is a mechanical procedure that records the routine economic activities of a

Accounting, I purchased equipment for 3,000 but only paid 1,000 of it and p...

I purchased equipment for 3,000 but only paid 1,000 of it and put rest of it on an account. how would I put that into a asset=liabilities+ owns equity equation?

Trading security, Glaser Services obtained 30% of the outstanding common st...

Glaser Services obtained 30% of the outstanding common stock of Nickels Company on January 1, 2008, by paying $864,180 for the 48,010 shares. Nickels stated and paid $0.50 per shar

Balance Sheet Classifications and Relationships, Balance Sheet Classi?catio...

Balance Sheet Classi?cations and Relationships Shelley and Co. has the following balance sheet elements as of December 31, 2012. Land. . . . . . . . . . . . . . . . . . . . . . . $

Which of the following about debits and credits is false, Which of the foll...

Which of the following about debits and credits is false? A. Credits increase revenues, gains and bonds payable B. Debits increase salaries expense and prepaid expenses (prepayment

Acc, Which of the following transactions does not involve an exchange of va...

Which of the following transactions does not involve an exchange of value? a. Payment of a debt b. Purchase of a building on credit c. Borrowing money d. Loss from theft

Final accounts, stpes to be taken prepaing for final accounts

stpes to be taken prepaing for final accounts

Salary potential of accountants, Q. Salary potential of accountants? Se...

Q. Salary potential of accountants? Selecting a major represents much additional than the choice of courses a student takes in college. To a significant degree, the student's m

Explain accounting cycle, Q. Explain accounting cycle? Creditors, Inves...

Q. Explain accounting cycle? Creditors, Investors as well as Managers use these statements in evaluating management's past decisions and as a basis for making future decisions.

Journal, Why to and by using in journal, trading a/c, p&l a/c and ledger?

Why to and by using in journal, trading a/c, p&l a/c and ledger?

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