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Category > Accounting Posted 25 Apr 2017 My Price 7.00

Big Boats Company entered into a contract

43. On March 31, 2013, Big Boats Company entered into a contract with Vacations Unlimited to produce a state-of-the-art cruise ship, to be completed within

three years. Big Boats estimated the total cost of building the ship at $300 million. The

contract price was $400 million. The ship was completed on February 15, 2016.

a. What tax accounting method must Big Boats use for the contract? Why?

b. Using the financial data provided relating to the contract’s performance, com- plete the following schedule:

Date	Total Costs Incurred to Date	Total Percentage of Contract Completed	Current-Year Revenue Accrued	Current-Year Costs Deductible
12/31/13	$ 90 million	———	———	———
12/31/14	150 million	———	———	———
12/31/15	270 million	———	———	———
12/31/16	360 million	N/A	———	———

c. What are the consequences of the total cost of $360 million exceeding the esti- mated total cost of $300 million?

Answers

Alpha Geek

(8)

Status NEW Posted 25 Apr 2017 09:04 AM My Price 7.00

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