ACC 302 Unit 2 Seminar (Kaplan)

1. When there is a significant increase in the estimated total contract costs but the increase does not eliminate all profit on the contract, which of the following is correct?
2. Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract. In this case, the entire expected loss should be
3. Kiner, Inc. began work in 2014 on a contract for $16,800,000. Other data are as follows:
                                                                                     2014                      2015      
   Costs incurred to date                                                $7,200,000          $11,200,000
   Estimated costs to complete                                        4,800,000                     —
   Billings to date                                                             5,600,000            16,800,000
   Collections to date                                                        4,000,000            14,400,000
              
   If Kiner uses the percentage-of-completion method, the gross profit to be recognized in 2014 is
4. In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the
5. Seasons Construction is constructing an office building under contract for Cannon Company. The contract calls for progress billings and payments of $1,240,000 each quarter. The total contract price is $14,880,000 and Seasons estimates total costs of $14,200,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2014.
               At December 31, 2015, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases. What is reported in the balance sheet at December 31, 2015 for Seasons as the difference between the Construction in Process and the Billings on Construction in Process accounts, and is it a debit or a credit?
   Difference between the accounts             Debit/Credit