Magnum Construction Contracted to Construct a Factory Building for $545,000

question 60

Essay

Magnum Construction contracted to construct a factory building for $545,000.The company started during 2012 and was completed in 2013.Information relating to the contract is as follows:
$\begin{array} { | l | c | c | } \hline & \mathbf { 2 0 1 2 } & \mathbf { 2 0 1 3 } \\\hline \text { Costs incured during the year } & \mathbf { 3 1 0 , 0 0 0 } & \mathbf { 1 7 0 , 0 0 0 } \\\hline \text { Estinated additional cost to complete } & 165,000 & \cdots \\\hline \text { Billings during the year } & 280,000 & 285,000 \\\hline \text { Cash collections during the year } & 260,000 & 305,000 \\\hline\end{array}$
Required:
Record the preceding transactions in Magnum's books under completed-contract and the percentage of completion methods.Determine amounts that will be reported on the balance sheet at the end of 2012.

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Definitions:

Conversion Costs

The combination of labor costs and overhead costs incurred to convert raw materials into finished products.

Manufacturing Costs

Expenses directly related to the production of goods, including materials, labor, and overhead.

Work in Process

Inventory items that are partially completed goods, still undergoing manufacturing processes.

Materials Costs

The total expenses incurred for the materials used in the production process or in the provision of services.