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(Recognition of Profit on Long-Term Contract —Overall Loss) Assume the facts given in E6.37 except that Vaughn's...

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Accounting

(Recognition of Profit on Long-Term Contract
—Overall Loss) Assume the facts given in E6.37 except that
Vaughn's non-cancellable fixed price contract with Atlantis is for$9.5
million. Billings and collections are lower in 2022 by $500,000each.


2020 2021 2022
Costs for the year $3,825 $4,675 $1,200
Estimated costs to complete 4,675 1,270 –0–
Progress billings for the year (non-refundable) 3,500 4,1001,900
Cash collected for the year 3,100 4,150 2,250
Instructions
a. Using the percentage-of-completion method, calculate the
percent complete for 2020 and 2021. Round the percentcomplete
to the nearest whole percentage point.


b. Calculate the amount of revenue to be recognized in 2020and
2021.


c. Calculate the construction costs to be expensed in 2021.


d. Prepare the journal entry at December 31, 2021, to recordlongterm
contract revenues, expenses, and losses for 2021.


e. What is the balance in the Contract Asset/Liability accountat
December 31, 2020 and 2021?


f. Show how the construction contract would be reported onthe
SFP and the income statement for the year ended December 31,
2021.


g. Assume that Vaughn uses the zero-profit orcompleted-contract
method. What would be the journal entry recorded on December 31,2021?

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