Question

Cheyenne Construction Company began work on a $424,000 construction contract in 2020. During 2020, Cheyenne incurred costs of $279,500, billed its customer for $204,500, and collected $170,500. At December 31, 2020, the estimated additional costs to complete the project total $150,500.

Prepare Cheyenne’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method.

Cheyenne Construction Company began work on a $424.000 construction contract in 2020. During 2020, Cheyenne incurred costs of $279,500, billed its customer for $204.500, and collected $170,500.At December 31, 2020, the estimated additional costs to complete the project total $150,500. Prepare Cheyenne's journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry"for the account titles and enter Ofor the amounts. Round answers to 0 decimal places, e.g. 5,275.) No. Account Titles and Explanation Debit Credit (a) (b)

Answer 1

a)	Total Estimated cost of the contract
	=$279500+150500
	=$430000
	Loss On Contract = $430000-424000
	=$6000
	Percentage of completion
	= cost incurred/total estimated cost
	= $279500/430000
	=65%
	Construction revenue in 2020 = contract price x % of completion
	=$424000*0.65
	=$275600
a)	Date	Account Title	Debit	Credit
		Contruction expenses	$        2,81,600
		Construction in progress		$              6,000
		Construction revenue		$        2,75,600
		( to record loss on contract)
b)		Loss from long term contracts	$              6,000
		Construction in process		$              6,000
		( to record loss on contract)