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8 November, 15:26

Carla Vista Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1300000 each quarter. The total contract price is $18330000 and Carla Vista estimates total costs of $17500000. Carla Vista estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2021, Carla Vista estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2021 and what is the balance in the Accounts Receivable account assuming Cannon Company has not yet made its last quarterly payment

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  1. 8 November, 15:55
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    Total amount of Revenue, 2021 = $5499000

    Balance in the Accounts Receivable account = $5250000

    Explanation:

    Given

    Progress billings and payments = $1300000

    Total contract price = $18330000

    Estimated total costs = $17500000.

    Time = 3 years

    Estimated Completion = 30%

    Calculating the total amount of Revenue from Long-Term Contracts recognized for 2021

    Total amount of Revenue, 2021 = Total contract revenue * % Completed during the year

    Total = $18330000 * 30%

    Total = $5499000

    Calculating the balance in the Accounts Receivable account

    Balance = New Estimate of Costs expected * % Completed during the year

    Balance = $17500000 * 30%

    Balance = $5250000
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