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