Question

Problem 3-3 Revenue recognition over time and at a point in time under ASC Topic 606 (LO3-4) 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: 2020 $150,000 Costs incurred during the year Estimated additional cost to complete Billings during the year Cash collections during the year 2019 $290,000 145,000 260,000 240,000 265,000 285,000 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. Complete this question by entering your answers in the tabs below. Required Required 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Prepare the entry to record revenue and expense. Note: Enter debits before credits. Date General Journal 2019 Construction revenue Construction expense Debit Credit Record entry Clear entry View general journal < Required 1 Required 2)

Answer 1

Refer the below images for the above asked questions, in a detailed way of solution.

Solution : 1. entrier Toornal (When Revenue over recognition time) : particolars Debit eredit $290000 construction To cost, in progress Are Dr payables, materials etc. 9 R90000 $260000 Accounts Receivable To Billings on Alc or contract $ 60000 Cash $240000 Atc. Dr To Accounts 1 3 400DO Receivable year 2020 * construction in progress All Dr 960000 Construction expense ale Dr 9290000 To Construction revenue $ 350000 (Revenue earned during period : [ 290000 [$ 435000]* $525000 - $ 350000) Construction in progress ale by 4 150COo To cash, payables, materials etc. Хоосо Accounts Receivable Alc Dr $ 265000 Go Billings on contract $265000 cash AC or $ 285000 $385.000 To Accounts Receivable $ 150.00 Construction in progress Ale or # 25000 Construction dy pense AR DY To Construction Revenue $ 175 000 (Revenue earned during the period a s 440000 14 440000] + $5250000 - $352000 hooo) Billings on contract All Dr $525ooo 90 construction in progress & 525000

Joonal entries (Revenue Recognition at a point in time - upon completion) particulars credit Debit 196000 year * 990000 Construction to cash in progress all or payables, materials etc. 2019 $ 60000 Accounts TO Receivable Billings on Alcor contract $ 16000 $240000 cash ate Dr 9 246000 To Accounts Receivable (Because the project is incomplete no revenue is recognized the year 2019-) for $ 150000 year 2020 & in Construction To cash progress Are Dr payables, materials etc $ 150000 $ 265000 x Accounts so {265000 Receivable Billings on ale or Contract $285.000 # 81000 Call Alle or To Accounts Receivable $440000 & Sagooo Construction expense Ale or Billings on contract the DY T e construction in progress To construction Revenue 9440000 $ $2000 particolars Summary : A comparison of amounts recognized Order each method: Recognition over time Recognition at a point in time Toral 2019 2020 2019 Construction revenue $525000 $350oo0 Salooo 1 S000 Construction expense $(440000) (1290000) (150000) in loco) (O) (440000) $85000 Gross Marga $85000 $60000 $25000