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Signed work completion record

hello and welcome to the session in which we would look at percentage of completion method so one way that we could recognize revenue is before delivery because in the previous session we looked at accounting for revenue at the point of sale so right would that with delivery before the delivery we're gonna see after so this is gonna be before the delivery method so we have the most notable example where we can recognize revenue before delivery before the delivery of the product because we recognize revenue once the once we earned it and the amount is realized and realized well don't forget about those two conditions that we learn about in the first first session when we recognize revenue two conditions must exist that's the general rule okay the amount is earned and it's realized or realizable okay this is the general rule and we looked at you know we we looked at at the point of sale now we're gonna be looking at the before the delivery session we're gonna spend some time here on this topic let's go ahead and start discussing before the delivery method so when do we use this method what one thing you need to know is when we have long term project like we're building a highway a boat an airplane basically it's a multi-year project it's a multi-year project so the first thing is it doesn't work with short-term project that's the first thing any gross long-term construction we're building a high-rise or some sort of a long-term construction we have two methods we could use the percentage of completion method and we could use the completed contract method okay what is the rationale the rationale is that the buyer and the seller have enforceable right so the buyer once takes the buyer once they sign the contract and once the seller sells the contract there is an enforceable right so yeah if you hire a construction company to build a high-rise for you that's it there's an enforceable right you have to pay them they have to build it so now we can use what's called the percentage of completion method also must use percentage of completion method when estimates of the progress toward completion revenues and costs are reasonably dependable so one of the conditions that we have to be aware of we have to be able to estimate estimate the progress toward completion so we need to know how far are we done in this project okay complete toward completion and revenues and costs are reasonably dependable so we can rely most from you're going to focus on revenue I'm sorry on cost because we're gonna assume that we know what the revenue is so we're gonna always assume that the revenue is fixed for our purposes so we're gonna be focusing more on the cost but remember the both have to be dependable and and all the following condition must exist so this is when we can use percentage of completion so the first general rule is you can measure your progress for example if you build in a highway maybe it's a 500 mile highway well if you completed 30 miles then you could say I completed 30 out of 500 okay so you have to have some type of estimate that you can measure your products of a measuring stick basically it's called the measuring stick and all the following conditions must exist contract there's a contract obviously should be signed a contract clearly specify the enforceable right regarding goods or services by the parties the consideration to be exchanged what are you giving me in exchange to my service and the manner and terms of settlement so we have basically simply put an enforceable contract okay the contract is enforceable and clear so there is no ambiguity about the contract everything is clear buyer can be expected to satisfy all the obligation the buyer is expected to satisfy all the obligation contractor can be expected to perform under the contractual obligation so the contractor can do the work the buyer is expected to pay and can pay and we have a contract we have an enforceable contract and don't forget the most important thing that we will see shortly that we we can measure progress using costs specifically we can measure progress using cost okay when do we use the completed contract method now this is a different method the previous method was the percentage of completion now this is a completed contract method totally different method when do we use this method when one notice one versus all notice here it says all all the following conditions only one conditionings if one of these condition exists the contract is a short-term contract well that's the first thing short term contract why because percentage of completion the first thing I told you it's for long term construction okay so if the short term contract you cannot use percentage of completion company cannot meet the condition for using the percentage of completion so you fail the previous slide so the previous slide here you failed something you fail something some of these conditions or there are inherent hazards in the contract beyond the normal reoccurring business risks so there must be a risk that may throw the project of off-track I don't know maybe there's a threat of natural disaster or a civil war who knows just there is some hazards that that it's it's too risky that we could use the percentage of completion because we cannot estimate the progress of the project yes this is only is the completed contract and we're gonna do both but the first thing we're going to focus on is the percentage of completion method percentage of completion method okay so for wila for total revenue to be recognized it so how would you recognize how much revenue do we recognize okay well we need a measuring stick so we need a measuring stick so we need to know how are we going to account for our progress and there's something called cost to cost this is the most common method so we're gonna be using the cost the cost information and that's why I said we're gonna need to know the cost of the project can we reasonably estimate the cost of the project because if we cannot reasonably estimate the cost of the project not because this year and the total cost then we cannot do it so assuming we're gonna be using costs to consummate at first we have to find out so first we have to find out what percent of the project we completed so how do you find what percent of the project we completed so copy down the formula it's the cost incurred to date divided by the most recent estimate of the total cost so the cost incurred today to this include prior year incur to date means prior year are included divided by the most recent estimated total cost so this will give us some percentage of how much of the project we completed now we're going to take this percentage that we calculated from here from this formula and multiply it by the estimated total revenue or gross profit in this number for our purposes the revenue will always be fixed in other words the revenue will be given to you we're gonna assume that once the two parties sign the contract they cannot change the revenue so that's easy okay so we'll take the percentage divided by the revenue and this is gonna give us revenue to be recognized to date now what we're not gonna use the gross profit we're gonna use the gross revenue as far as illustrating this formula and we're gonna take the revenue to be recognize the date - the revenue recognized in prior year so we look at the revenue that should be recognized the date which what we calculated above and we subtract the revenue that we did in prior years because we need to take out the prior year revenues because we count them in the prior year so we end up with the current year revenue or gross profit okay so this is how we and the best way to do this is to is to look at an example so let's take a look at this straightforward example but it's important because it's important to learn the basic steps so we have hardhat construction it's a construction company and has a contract to construct a 4.5 million dollar bridge so this is a multi-year project so this is the revenue this is the revenue component and an estimated cost of 4 million we estimate the cost to be 4 million let's do something real quick if the project is sorry if the revenue is 4.5 million and we estimated to incur 4 million so right now the total profit on the project is half a million they just won I should just want to write this down you have to start to get get your head around this hey the contract is to start July 2014 and the bridge to be completed October 2016 so we have 2014 2015 and 2016 data the following data pretty pertained to the construction period and this is the data that we have in 2014 cost the date is a million we incurred $1,000,000 in cost the date estimated cost to complete the project which what's left is three so let's look at this so we we basically incurred a million dollars this year and we still have four million to go so we know that total cost total cost is four million total cost is four million okay because we need that process process billing during construction process billing during construction it means what's gonna happen you need to know this terminology as we are working on the prop on the project we are going to be billing the client we're gonna be billing the client basically we're gonna be sending bills and we're gonna be belong to the client as account receivable okay we're gonna have a billing account we'll see that later also the client will pay some cash so we built the client 700 I'm sorry nine hundred thousand the client paid 750 thousand so this is year one 2014 so before we go to 2015 I want to show you the accounting for 2014 because that's the simplest way to start this so you need to know how much revenue are we gonna be recognizing how much profit we're gonna be recognizing and what are the journal entry for the balance sheet now let's start so this is the data that we are working with 2014 cost they make sure you understand what each one of them means contract price does not change for 2014 is 4.5 million cause the date is a million estimated to cost the complete three total cost is four million okay estimated gross profit is half a million not a problem now we need to find out that first step what percentage of the project we completed as of year 1 or 2014 well what's the formula formula that says cost divided by total cost this is the formula that I that I showed you earlier right here cost incurred to date divided by the most recent total cost so this is the cost the date is obviously only 1 million because this is here one cost the date divided by total cost so so far we completed 25% how did we came up with the 25% cost the date 1 million divided by total cost 25 percent good let's look at 2015 just just to find the percentages first 2015 cost the date remember cost the date for 2015 means it include cost from the prior year because it's cost the date its include everything and estimate the cost the complete is 1 million 1 million 134 thousand process filling we build the client 2.4 million the client paid 1.75 so let's go ahead and look at this estimated cost the complete is 1 million 134 thousand cost the date is 2 million 2 million 916 divide this by so remember the cost went up by notice the cost of the project went up by fifty thousand email you might be asking well didn't we say that the cost is four hundred thousand well this is what we estimated initially maybe we needed maybe the material that we need for this bridge maybe the metal the raw material went up in price maybe we did not have enough employees we could not secure enough employees so we had to pay employees premium to attract employees to work on this project whatever the reason is but total cost could deviate so the cost of the project could deviate and now that the project cost went up fifty thousand not a big deal we are still making profit it's not the five hundred thousand it's only four hundred and fifty thousand so now so notice here our profit now if you want to look at the profit it's going to be four hundred and fifty thousand you can ignore this for now but I just show you that we are and we incur more costs that's gonna take away from our profit because the price is fixed the contract price is fixed so now let's take a look and see how much we completed as of year two as of year to cost the date this is the cost the date two million nine hundred and sixteen and this is total cost notice total cost change as I told you we incur the $50,000 more someone should be questioned for this why did we incur this cost who knows who but basically a variance analysis should show us from managerial accounting why would from cost accounting why you know was it material price variance labor price variance efficiency variance whatever okay so by year two we completed 72% of the project and obviously by year three we completed whoops we completed obviously by year three we completed 100% of the project because constant date is 4.5 million nothing to complete estimated total cost is 4.5 4 point 5 divided by 44 million 50 divided by 4 million 50 obviously we we incur we we completed this and we have a 100% completion so first we figure out the degree of completion year 127 year to 72 year 3 100% God and the prophets tell 450 dancer now we're going to look at the journal entries and those journal entries this one that you see on the screen to smart them down those are balance sheet they are all balance sheet entries they are all balance sheet entries and let's take a look at the first entry which is the cost date which is 1 million we debit $1,000,000 something called construction and process a new account called construction and process 1 million we credit are no material cash payable whatever we incurred okay so the cost that we incur it's basically an asset because we are building an inventory like we are building the bridge and we haven't delivered the bridge yet so as we're building the bridge the bridge is under an account called construction and process so as we incur material cash payable other cost we debit an asset called construction and process which is an asset now also so this is the 1 million so debit construction and process credit material again this is an asset credit material cash whatever we incur to record the billing we build the client 900,000 we debit account receivable credit an account called billing on construction and process so we're gonna this account is a contra so billing is a contra to construction and process so billing is a contra to construction and process it's a contra account so basically we debit accounts receivable credit a new account called billing on construction and process which is a contra account - construction and process contra means it reduces ok then we collected 750,000 we debit cash 750 credit accounts receivable 750 and those are the balance sheet account for year one could you do the balance sheet account for a year to give you a moment and let's see if you can do that okay and I hope you were able to do it for year one we have a four year to 15 we have 1 million 916 devid construction and process credit material cash and payable hold on a second it says here two million nine hundred and sixteen well this is cost the date cost the date thus two million include the 1 million therefore this year we only inferred we only incurred 1 million nine hundred and sixteen thousand so just just be aware of that just be aware of that just be careful a lot of students debit construction and process 2 million nine hundred and sixteen and what you should be doing now just create a CIP account construction and process and keep track of it you have 1 million here 1 1 million 916 here too so keep track of your construction and process account because you're gonna see what's gonna happen to it at the end in here to progress filling 2.4 million debit accounts receivable credit building in progress year 3 you collected 1 million 750 you debit cash credit account receivable so the two new accounts that you are seeing here are one is construction in process and one is billing ok we're gonna see how do they connect to each other also year 3 1 million 134 thousand is the cost again you will take the this is the cost date - the prior cost so 4 million five hundred and fifty then you subtract so to find the 1 million one to find this number you will take 4 million and 50 - two million nine hundred and sixteen and this this way you will find how much cost you incurred this period remember this number here is cost today and I keep saying this because I know word students fall into this they just this DC cost and say okay this is easy well he have to differentiate between cost costs the date and total cost this is cost today so therefore you will take four million and fifty thousand minus the prior costs today did the prior P cost you'll get 1 million one hundred and thirty-four thousand again account receivable should be easy 1.2 million cash collection 2 million good so those are all once again let me just write this down balance sheet accounts so why am i emphasizing this because we're gonna have balance sheet account and we're gonna have income statement account what goes on the income statement well revenues and expenses what does that mean it means how much of the revenues and the expenses will be reported before we deliver the bridge remember this is the percentage of completion method so we're gonna see next is is the revenues now for the first year we complete if you remember 25 percent of the project 25 percent project therefore we can recognize 25 percent of the revenue 25 percent of the revenue equal to 1 million one hundred and twenty five thousand the cost that we incurred 1 million this is from the prior data for 2014 therefore our gross profit for year 2014 is one hundred and twenty-five thousand good recognize any in the prior year we have none in the prior year because this was 2014 was the first year therefore recognized in the current year 1 million 125 1 million and cost and the difference is 125 thousand year two we completed 72 percent of the project for 4.5 million times 72 percent gives us a revenue of revenue to date remember this is this column is the date revenue to date of 3 million two hundred and forty minus the cost to date of million nine hundred and sixteen the gross profit again this is to date this is 324 what do we need to do we need to take the profit to date okay subtract the profit to date from the prior year profit we need to subtract the profit to date from the prior year profit so what was the prior year profit well the prior year profit is derived the prior year revenues and the prior year expenses so we'll take this this today - the prior year gives us recognizing this year prior year - this year equal to how much is recognized in the current year so on the current here we have revenues of two million one hundred and fifteen which is much more revenues than the prior year and much more cost and our profit is one hundred and ninety nine thousand and the same concept will apply to year the same concept will apply to year three year three what we do we'll do the same thing by year three we completed one hundred percent of the project so forth four point five million times one hundred percent our today revenue is for four point five million our cost date is four million and fifty remember we went a little bit over costs in this project then we then we subtract the prior revenues which is three million two hundred and forty to get to our current revenue for this year then we'll take our total cost subtract the prior cost to get our cost for this year and year three the project made one hundred and twenty six thousand so just I'm just wanna do something real quick here one ahead 125 then profit year two ahead 199 in profit and year three I had 126 and if I add all of those they should add up to 450,000 which should be my total profit for the project remember the total profit initially we thought we were gonna be making 500,000 we only end up making 450,000 because our cost unexpectedly Rises okay now that's important it's important to understand that if cost rises what could happen if cost rises and if it went out of control or if it went it went way higher than what it should be what's gonna happen we're gonna be incurring a loss so we're gonna have another recording dealing with a long-term construction progress were we are have to deal with a loss we have to deal with the loss that's eventually soon mean in this in this chapter now let's look at the journal entries and those are let's call those income statement the journal entries those are income statement journal entries for year 1 revenues was 1 million 250 revenue from long-term contract 1 million one hundred and 225 sorry cost is 1 million debit construction expense which is an expense 1 million and the difference between the two is gross profit where do we put the gross profit we put the gross profit in this account that we created earlier we said this is an asset account it's called construction and process so what goes into construction and process two things so what goes into CIP then structure and process the profit plus the cost okay because we incurred 1 million in cost we already put that into construction and process let me show you here you remember this 1 million right here it's into construction and process so what goes into the construction and process account two things the cost of the project plus the profit okay so let's look at year - a year - we'll do the same thing a year 2 we debit construction and process for the profit the profit was $1.99 I like to start with revenues we credit revenues two million one hundred and fifteen just in case you're wondering where these numbers are coming from cost for that year is 1 million nine hundred and sixteen and the profit was one hundred and ninety nine thousand and hopefully you could do year three hopefully you can do year 3 that should not be should should should be an easy year to do and here's the journal entry for year three remember what did I say about these accounts these accounts are these accounts our income statement account these accounts our income statement account now but one thing you want to remember hopefully you kept track of your CIP your construction and process and what did I tell you about CIP well let me let me show you what happened to CIBC CIP let me just go to my let me go to my dis account here if you kept track of your CIP account and you should also kept track of your billing and if you did not you could go back and do this well you're gonna notice that CIP if you kept track and your CIP and what goes into CIP two things let me tell you one more time it's the cost of the project plus the profit on the project this is what goes into CIP what goes into the billing the billing of the project the building if you go back and you add up all the buildings that we did it goes on the credit by the time the project is done we should have in this in this account four million five hundred thousand and we should have billing a 4,500,000 680 kept track of those two accounts okay this is an asset and this is a contra asset to this asset so at the end of the life of the project 4,500,000 - 4,500,000 basically have a zero asset now why do you have a zero asset think about it as you are building this asset as you are building the bridge that asset is the bridge as you are building the bridge as you are building the bridge it's an asset but at the same time you are billing for it so you are creating an account receivable so your you are creating an account receivable as you are building the project so you cannot have two asset you cannot have the accounts receivable and the asset be bridge at the same time so you create a CIP then you create a billing account to reduce your CIP so hopefully you understand why do we have a CIP because if you have the CIP without the billing without the billing account to reduce the CIP and you build it you build the customer now you have two asset one a CIP and one is account receivable that are accounting for the same asset I hope you can see this picture therefore we create the billing to reduce the CIP account where what am I going with all of this well what happened when the project ends when the project ends you don't you you don't deliver the bridge physically but basically the bridge is gone the bridge is no longer yours so what's gonna happen is this if the if the bridge once the bridge is delivered to the to the city to whoever you deliver it to you have to remove the bridge so you have to remove the bridge therefore the CIP account go down to zero and you're no longer billing these this entity you have to bring it down to zero so the last entry in the project the last entry interpreter in the project is to do what is to remove the construction and process and the billing account remove them reduce them down to zero reduce them down to zero so that's why that's why we want to make sure we do this entry at the end otherwise if we keep the CI if we kept them I mean the net effect is zero if we kept the billing and the CIP but since we should not have the asset nor the billing okay so the asset is gone okay and this is and this is F obviously if he kept track of your construction and process for 2014 you had a cost of a million gross profit of 125 2015 cost of 1 million 916 gross profit of 199 so on and so forth so this is what you had so once the project is completed you credit you credit this account and you debit the building to remove the building hopefully this is making sense to you now let's take a look at how we present this information on the financial statement okay financial statement presentation percentage of completion method computation of unbuilt contract price so what happened is this contract revenue recognized for year one contact revenue recognized for year one you remember an year one we completed 25% therefore we can recognize of the revenue 25 percent which is 1 million 125 and we built the client nine hundred thousand we built the client nine hundred thousand what does that mean it means this unbilled amount unbuilt amount unbelled amount because we we bailed them only 900,000 the untold amount because it's positive because it's a positive amount simply put we did we did 1 million 125,000 worth of work and we only build the client for nine hundred thousand so the difference between those two which is construction and process - the billing this is basically an asset because we we can still build them we did some work and we could still build the client okay so if it's so if we have if this number is positive it's an asset if we happen to have a negative then it means we did not do enough work but we were billing the client ahead which will be a liability but let's take a look at the balance sheet and see what it looks like remember on the income statement we have revenues we have construction cost of cost of construction and we have gross profit therefore what's gonna happen is on the balance sheet obviously we build them 900,000 we collected 750 the net is one 150 this is the net account receivable but I want you to focus right here on the second and this one here this is the inventory account the bridge construction and process is 1 million one hundred and twenty five less the billing - the billing will give us 900 thousand again this number is called costs and recognized profit and access of the link okay in other words we did $1,125,000 of work we build the client 900,000 this is cost and in profit and access of villain remember because construction and process include both cost and profit so this is this is so this is a positive situation and we this is an asset because it's a positive number when you have the difference between those two now what happened is what happened if you have more building than construction and process and this is what happened in 2015 in 2015 we had revenues of 2 million 115 cost of construction 1 million 116 gross profit 199 okay so account receivable we had the prior to year 150 we build them 2.4 we collected 1.7 you know this is account receivable not a big deal just keep track if you're interested in account receivable now let's take a look at the billing in year 2 what happened to the year to year 2 a free kept track of your billing account your billing was three million three hundred thousand so if you go back for 2014 and kept track of your billing account if you did a billing account billing T account you would have had a balance of three million three hundred thousand and your CIP if you kept track of your CIP let me do it on the let me do it on the note so if you go back here and as of 2015 your CIP if you kept track of your CIP you could go back and do this on your own if you'd like to your CIP balance was three million two hundred and forty and you're billing the account which is the contra - CIP if you kept track of this one it's three million I'm sorry it was three million three hundred thousand and under this scenario billing is more than CIP the billing you built the client more than more than the word that you have done well guess what if you're billing the client now you have a liability because you didn't do the work yet you have an obligation to do the work under those circumstances you have an account called billing and access of cost and recognize profit now now your billing is an access therefore it's a liability so your job is to next year in the in the near future work because you kept billing this client billing this client more than more than what you should have had so hopefully this makes sense so this CIP this CIP - the CIP - the billing that could be an asset or it could be a liability the CIP - billing depending if you have at any point in time if you have more construction and process then billing you have an asset and the opposite would have been true if you have more the link than construction and process now remember as I told you earlier at the end of the project those two account equal to each other those two account equal to each other and we we close them to close the project now the best way to do this is to work another example so let's take a look at another example and hopefully it makes more sense to you if we look at another example let's look at this example we have this Casper construction what you should do now is you should pause your recording look at this data so we have a contract price of six seventy five cost incurred current year estimated costs to complete the project in future years putting the customers cash receipt and try to prepare the journal entries for 2014 2015 and 2016 this is the only way you would learn this so I'm gonna what you should do now on your YouTube just pause this recording right now you have all the data that you need start by determining how much you completed in year 2014 how much you completed in 2015 and obviously by 2016 you completed the project okay hopefully you did complete this so let's take a look at the answers well in 2014 cost incur to date you included 150 estimated costs to complete the project for 50 so the total cost is four hundred six hundred thousand so you completed 150 out of six hundred thousand I completed 25% of the project the contract price is 675 you can recognize of revenue 25 percent which is 168 750 then you have to subtract any prior revenue what's the prior revenue nothing you don't have any prior revenue because this is here one so your revenue for year one is 168 thousand seven fifty your cost that incurred in year one one hundred and fifty thousand your gross profit is eighteen thousand seven fifty now what you should do you should prepare the journal entry for this do prepare the journal entry for the cost and we're gonna do this in a moment but just also think about you know what should you debit what should you credit but we'll look at that shortly next thing 2015 2015 cost incurred today the total cost incurred to date is four hundred thirty seven thousand four hundred estimated costs the complete is 170 thousand 100 in case you are wondering where these numbers are coming from they're all coming from here estimated costs to complete the project cost concussed incurred year-to-date so on and so forth okay so estimated costs the complete notice our cost went up seven thousand five hundred but we are still good because the contract price is six seventy five so we are still profitable because if we are not profitable anymore we have to do something which we'll see later okay estimated percentage to complete if you take for thirty seven four hundred divided by total contract cost at seventy two percent now you can take your contract price times seventy two percent you get your revenue recognizable then you have to subtract the prior year revenues so the Priory of revenue you have to take it out from this calculation so revenue recognized for this year three hundred seventeen thousand to fifty cost incurred currently is two hundred eighty seven thousand four hundred again I believe that was given to you as well whoops went too far too quickly cost incurred to date right here this year so you can find your you can find your gross profit for this year twenty nine thousand eight fifty now for 2016 let's look at 2016 cost incur to date is 607 five hundred estimated costs the complete obviously 607 five hundred so he completed one hundred percent of the project you'll take revenues times 100 percent gives us six seventy five - any revenues you took out the account at the prior year we'll give us revenue recognized currently which is one eighty nine - the again this is given this line is given just go back to the previous slide we find the gross profit in recognize now now let's look at the journal entries construction and process and we you should create T account just say you know this is my CIP and start to put their 150 so what goes on to this account two things your cost and your gross profit so first we will do the cost debit construction and process credit cash this this would be cash this could be AP this could be material depending what you spend on this project then you build the client 135 debit accounts receivable credit billing notice you credit building you don't credit sales you don't credit sales you Credit Billing debit cash credit accounts receivable this is pretty straightforward when you receive the money in the supplies for all three years now for year one your revenue is 168 750 again what is this number coming from right here 168 750 then your expenses 150 your expenses 150 you debit construction expense and CIP the the profit goes into CIP so you'll take the profit and you park it into CIP okay then you have to the same thing whatever you construction and process then how much you build this is the entry how much cash you received and this is the income statement entry same thing for year three then this is the income statement entry then once the project is finished remember once the project is finished you close the project so you're going to have once it's finished you're gonna have in CIP if you keep track of your CIP you will have six hundred and seventy five and you will have an billing sips you'll have an billing six seventy five so what do you do you debit the billing and credit the CIP to close this account so you debit this credit this close them out okay let's take a look at the income statement and snapshot of the balance sheet year one this is what goes on income statement revenues expenses and obviously the difference is the gross profit remember this is a CIP the balance goes into the CIP this is this is a calculation this is not an account this is a calculation okay then in the first year account to civil is twenty two thousand five hundred you had more cost and profit than billing so you have an asset and 2015 this is the revenues this is the expenses and this is the profit this is your account receivable want one if you don't know what this is coming from just go back create a t account for account receivable and keep track of your account receivable in here too we had more billing than cost therefore we had a liability notice in here - we had a liability of 9000 in year three revenues expenses profit and in year three the billing and the cost the billing the cost and the billing should equal to each other therefore the balance will be zero and we'll need to remove them obviously but the balance will be zero so hopefully this is a percentage of completion method example while we are generating a profit the next thing the next topic we're going to look at is the completed contract method completed contract method then we're going to look at the proper accounting for losses so eventually we're going to get two losses when it comes to a percentage of completion method okay so the next topic will be a completed contract method the first thing we learn is when do we use the completed contract method which we looked at in this session but we'll review it again if you have any questions any comments by all means email me or see me in class