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Construction & Telecom Accounting

Nair A.G. enters into a contract to build an apartment building for €1,000,000 with bonuses of €150,000 for completion by certain dates that are reduced by €50,000 each week delayed. Based on prior probabilities, the estimated transaction price is €1,127,500. Telephone Sellers recognizes revenue from prepaid phone cards as usage occurs over several months, with income recognized monthly after deducting related usage expenses paid to the phone network. Ting Group uses the percentage-of-completion method to recognize 34% of the ¥7,000,000 contract revenue in 2019, along with the corresponding 34% of ¥5,000,000 estimated costs from the ¥

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268 views3 pages

Construction & Telecom Accounting

Nair A.G. enters into a contract to build an apartment building for €1,000,000 with bonuses of €150,000 for completion by certain dates that are reduced by €50,000 each week delayed. Based on prior probabilities, the estimated transaction price is €1,127,500. Telephone Sellers recognizes revenue from prepaid phone cards as usage occurs over several months, with income recognized monthly after deducting related usage expenses paid to the phone network. Ting Group uses the percentage-of-completion method to recognize 34% of the ¥7,000,000 contract revenue in 2019, along with the corresponding 34% of ¥5,000,000 estimated costs from the ¥

Uploaded by

Nurul Khalishah Azzahra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Kuis I Kamis, 1 Oktober 2020

BE18.6 (LO2) Nair A.G. enters into a contract with a customer to build an apartment building
for €1,000,000. The customer hopes to rent apartments at the beginning of the school year and
provides a performance bonus of €150,000 to be paid if the building is ready for rental beginning
August 1, 2020. The bonus is reduced by €50,000 each week that completion is delayed. Nair
commonly includes these completion bonuses in its contracts and based on prior experience,
estimates the following completion outcomes:
Completed by Probability
August 1, 2020 70%
August 8, 2020 20%
August 15, 2020 5%
After August 15, 2020 5%
Determine the transaction price for this contract

August 1, 2020 70% chance of €1,150,000 [€1,000,000 + (€150,000)] = €805,000


20% chance of €1,100,000 [€1,000,000 + (€150,000 -
August 8, 2020 = €220,000
€50,000)]
5% chance of €1,050,000 [€1,000,000 + (€150,000 -
August 15, 2020 = € 52,500
$100,000)]
5% chance of €1,000,000 [€1,000,000+ (€150,000 -
After August 15, 2020 = € 50,000
$150,000)]
Transaction Price =€1,127,500

BE18.11 (LO2, 3) Telephone Sellers sells prepaid telephone cards to customers. Telephone
Sellers then pays the telecommunications company, TeleExpress, for the actual use of its
telephone lines related to the prepaid telephone cards. Assume that Telephone Sellers sells
£4,000 of prepaid cards in January 2019. It then pays TeleExpress based on usage, which turns
out to be 50% in February, 30% in March, and 20% in April. The total payment by Telephone
Sellers for TeleExpress lines over the 3 months is £3,000. Indicate how much income Telephone
Sellers should recognize in January, February, March, and April

A. Revenue
 January : £0
 February : £4000 x 50% = £2000
 March : £4000 x 30% = £1200
 April : £4000 x 20% = £800

B. Expense
 January : £0
 February : £3000 x 50% = £1500
 March : £3000 x 30% = £900
 April : £3000 x 20% = £600

C. Operating Income
 January : $0
 February : £2000 - £1500 =£500
 March : £1200 - £900 = £300
 April : £800 - £600 = £200

BE18.22 (LO5) Ting Group began work on a ¥7,000,000 contract in 2019 to construct an office
building. During 2019, Ting Group incurred costs of ¥1,700,000, billed its customers for
¥1,200,000, and collected ¥960,000. At December 31, 2019, the estimated additional costs to
complete the project total ¥3,300,000. Prepare Ting's 2019 journal entries using the percentage-
of-completion method.

2019
Contract Price ¥7,000,000
Less estimated cost:
Costs to date ¥1,700,000
Estimated costs to complete ¥3,300,000
Estimated total costs ¥5,000,000
Estimated total gross profit ¥2,000,000
Percent complete 34%
(¥1,700,000/¥5,000,000)
2019
Costs to date ¥1,700,000
Estimated costs to complete ¥3,300,000
Progress billings during the year ¥1,200,000
Cash collected during the year ¥960,000

2019 Recognized in current year


Revenues ¥2,380,000
(¥7,000,00 × 34%)
Costs ¥1,700,000
Gross profit ¥680,000
1. Jurnal untuk mengakui cost of construction

Construction in Process ¥1,700,000

Materials, Cash, Payables, etc ¥1,700,000

2. Jurnal untuk mengakui revenue and gross profit

Construction in Process (gross profit) ¥680,000

Construction Expenses ¥1,700,000

Revenue from Long‐Term Contracts ¥2,380,000

3. Jurnal atas penagihan piutang pada pelanggan

Accounts receivables ¥1,200,000

Billings on construction contract ¥1,200,000

4. Jurnal atas pelunasan sebagian piutang pelanggan

Cash ¥960,000

Accounts receivables ¥960,000

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