Chapter 1
Recognition and Measurement
19
AP-10A (
5
)
Avonshire Developments Inc., a publicly traded corporation, was contracted by a local
parish to perform massive renovations to the aging church building in Waterloo, Ontario.
The renovations were to be conducted in phases over four years starting in 2016. The total
contract price agreed upon was $3.5 million. The following costs were incurred by Avonshire
over the four years construction took place.
2016
$600,000
2017
$300,000
2018
$900,000
2019
$200,000
The project was completed in 2019, as scheduled, with no amounts outstanding.
Calculate the gross profit of Avonshire for each of the four years using the percentage-of-
completion method.
Year
Actual Costs
Incurred
Percentage of
Completion
Revenue
Recognized
Gross
Profit
2016
2017
2018
2019
AP-11A (
6
)
Aurora Borealis Ltd. operates a cold storage facility that has 25 huge refrigerators. The
company recently purchased a new refrigerator. Aurora paid $400,000 in cash, $250,000 in a
note payable and gave the retailer an old refrigerator with an amortized cost of $80,000 and
fair value of $100,000 in exchange for the new refrigerator.
Determine the cost of the new refrigerator.
