Buildings Ltd

question 9

Essay

Buildings Ltd. is constructing a residential building in downtown Vancouver for a contract price of $15,000,000. Costs for this contract were initially estimated to be $12,000,000. The company uses the percentage of completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following information is available:
Required:
a. Calculate the amount of gross profit to be recognized in each year. Show computations in good form.
b. Calculate the amount of revenue to be recognized in Year 2.
c. Prepare all the journal entries required in Year 2.
d. Prepare the journal entry required in Year 3 to acknowledge completion and acceptance of the project.

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Definitions:

Self-Deception

The psychological process of denying or rationalizing away the relevance, significance, or truth of contrary evidence or logical argument.

Confrontation

A direct engagement or encounter between parties with conflicting views or goals, often aiming to resolve disagreement.

Aggression

Behavior aimed at causing harm, pain, or distress to another, either physically or psychologically, often motivated by hostility.

Denial

A psychological defense mechanism where a person refuses to accept reality or facts, thereby blocking external events from awareness.