Percentage-Of-Completion Method Chickadee Construction Was Awarded a Contract to Construct

question 378

Essay

Percentage-of-completion method Chickadee Construction was awarded a contract to construct an interchange at the junction of two major freeways in a Canadian city at a total contract price of $10,000,000.The estimated total costs to complete the project were $8,000,000, and it is expected to take two years. Instructions Using the percentage-of-completion method and the cost-to-cost basis,
a)Prepare the journal entry to record construction costs of $4,400,000 for the first year.
b)Prepare the journal entry to record progress billings of $5,000,000 for the first year.
c)Prepare the journal entry to recognize the revenue and gross profit for the first year.

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Definitions:

Keynesian

Pertaining to the economic theories and policies of John Maynard Keynes, emphasizing the role of government intervention to ensure full employment and stable economies.

Classical

Pertaining to the school of economic thought that emphasizes free markets, free trade, and the idea that economies self-regulate through supply and demand.

John Maynard Keynes

A British economist whose theories on the influences of macroeconomic factors on economic output and government interventions shaped modern economics.

Savings

The portion of disposable income not spent on current consumption but set aside for future use, often in a deposit account or as investments.