Question

MSK Construction Company contracted to construct a factory building for $525,000. Construction started during 2019 and was completed in 2020. Information relating to the contract follows 2019 $290,000 145,000 260,000 240,000 2020 Costs incurred during the year Estimated additional cost to complete Billings during the year Cash collections during the year $150,000 265,000 285,000 Required 1. Record the preceding transactions in MSK's books assuming it recognizes revenue over time and uses costs incurred to measure the extent to which its performance obligation has been satisfied 2. Record the preceding transactions in MSK's books assuming it recognizes revenue at a point in time when control of the completed factory is transferred to the customer at the end of the project. Answer is not complete Complete this question by entering your answers in the tabs below Required 1Required 2 Record the preceding transactions in MSK's books assuming it recognizes revenue over time and uses costs incurred to measure the extent to which its performance obligation has been satisfied. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Date General Journal Debit Credit 2019 Construction in progress 290,000 Cash, payables, materials, etc 290,000

Answer 1

Credit Debit $290,000 2019 $525,000 2020 $525,000 No. Date General Journal 1 1 2019 Construction in prgress Cash, Payables, materials etc (To record cost of construction) $290,000 Contract price (a) Less: Estimated Cost Costs incurred to date Estimated costs to complete Estimated Total costs (b) Estimated Gross Profit (a) - (b) $290,000 $145,000 $435,000 $90,000 $150,000 $0 $150,000 $375,000 $260.000 Accounts Receivable Billings on Construction (To record billing to date) $260.000 66.67% 100.00% $240,000 Cash Accounts receivable (To record collection) $240.000 Percentage (% of completion (Cost incurred to date / Estimated total cost) Gross profit earned Less: Gross profit earned previous year Gross profit recognized $60,000 $375,000 $0 $60,000 S60,000 $315,000 $290,000 $60.000 Construction Expense Construction in Process Construction Revenue (To recognize revenue) $350,000 $150.000 5 2020 Construction in prgress Cash, Payables, materials etc (To record cost of construction) $150.000 $265.000 Accounts Receivable Billings on Construction (To record billing to date) $265,000 $285.000 Cash Accounts receivable (To record collection) $285,000 $150,000 $25,000 Construction Expense Construction in Process Construction Revenue (To recognize revenue) $175,000 $525,000 Billings on Construction Construction in Process $525.000