Reference no: EM133049985
Question - In February 2020, Crane Construction signed a contract and commenced construction on a parking garage. The total contract price was $91.2 million and was expected to be completed in July 2022 at a total estimated cost of $82.4 million. Payment by the customer was to be made in several stages, based on significant events and dates throughout the construction timeline. Based on the terms of the contract with the customer, control over the parking garage (i.e. ownership) does not transfer to the customer until completion. Crane's year-end was September 30 and follows ASPE.
By the end of September, 2020, Crane had incurred $20,600,000 in costs and had invoiced $10,300,000 in progress billings. $8,800,000 of the progress billings had been collected.
By September 30, 2021, Crane had incurred $39,200,000 in total costs and had invoiced $45,200,000 in progress billings, including the progress billings in 2020. Of the total billings, $30,900,000 in total had been collected. Also, Crane reviewed its cost estimates on the project, and now believed the parking garage would cost $78.4 million in total to complete.
1. Using the completed-contract method, prepare all journal entries required for the year ended September 30, 2020. Use Materials, Cash, Payables for costs incurred to date.
2. Using the completed-contract method, prepare all journal entries required for the year ended September 30, 2021. Use Materials, Cash, Payables for costs incurred to date.
3. Prepare the journal entry to record revenue and cost of construction on completion of the project, assuming all billings are completed and the total actual cost is the same as the 2021 estimate. Use Materials, Cash, Payables for costs incurred to date.
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