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

BRS, what is the BRS

what is the BRS

Sales returns affect both revenues and cost of good, Q. Sales returns affec...

Q. Sales returns affect both revenues and cost of good? When a company sells merchandise to customers then it transfers the cost of the merchandise from an asset account that i

What is timeliness, Q. What is Timeliness? The Timeliness requires acco...

Q. What is Timeliness? The Timeliness requires accountants to provide accounting information at a time when it perhaps considered in reaching a decision. Usefulness of informat

Are mailing lists is prepaid or period expense?, Are mailing lists are cons...

Are mailing lists are considered as prepaid or period expens?

Concepts and Conventions Underlying the Preparation of Finan, nWhat is the ...

nWhat is the implication of applying accounting concepts wrongly.imum 100 words accepted#

Target company issues bonds with a par value, Target Company issues bonds w...

Target Company issues bonds with a par value of $900,000 on their stated issue date. The bonds mature in 10 years and pay 10% annual interest in semiannual payments. On the issue

Uses of funds flow statement, Uses of Funds Flow Statement :  This decla...

Uses of Funds Flow Statement :  This declaration is extremely helpful for policy makers as it traces the movement of funds inside the organization.  Various of the uses include

Illustrate the financial accounting process, Q. Illustrate the Financial ac...

Q. Illustrate the Financial accounting process? In this section we describe the accounting equation as the framework for the entire accounting process. Then we demonstrate you

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

Q. What is Intangible Assets? Intangible assets consist of the nonmonetary, noncurrent, nonphysical assets of a business. Companies should charge the costs of intangible assets

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