Community Apartments Inc. (CA Inc.)is building a luxury condominium for a contract price of $68,000,000. This is estimated to be a three-year project with an estimated cost of $54,000,000. CA Inc. uses the percentage-of-completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following is the best available information at the end of each year:
Required:
a. Compute the amount of gross profit to be recognized in Year 1, Year 2, and Year 3. Show computations in tabular form provided below:
b. Determine the performance that would be reported under the cash basis and accrual basis of accounting for Year 1 of this company. Explain how revenues are matched with expenses when the percentage of completion basis is used.
c. Complete the PARTIAL Balance Sheet for Year 1
Current assets
Current Liabilities

Question

Community Apartments Inc. (CA Inc.)is building a luxury condominium for a contract price of $68,000,000. This is estimated to be a three-year project with an estimated cost of $54,000,000. CA Inc. uses the percentage-of-completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following is the best available information at the end of each year:
  Required:
a. Compute the amount of gross profit to be recognized in Year 1, Year 2, and Year 3. Show computations in tabular form provided below:
  b. Determine the performance that would be reported under the cash basis and accrual basis of accounting for Year 1 of this company. Explain how revenues are matched with expenses when the percentage of completion basis is used.
c. Complete the PARTIAL Balance Sheet for Year 1
Current assets
  Current Liabilities

Quizplus · Accepted Answer

The Answer of Community Apartments Inc. (CA Inc.)is building a luxury condominium for a contract price of $68,000,000. This is estimated to be a three-year project with an estimated cost of $54,000,000. CA Inc. uses the percentage-of-completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following is the best available information at the end of each year:
  Required:
a. Compute the amount of gross profit to be recognized in Year 1, Year 2, and Year 3. Show computations in tabular form provided below:
  b. Determine the performance that would be reported under the cash basis and accrual basis of accounting for Year 1 of this company. Explain how revenues are matched with expenses when the percentage of completion basis is used.
c. Complete the PARTIAL Balance Sheet for Year 1
Current assets
  Current Liabilities