Question

Exercise 18-36 Marin Construction Company uses the percentage of completion method of accounting in 2017, Marin began work under contract E2-02, which provided for a contract price of 52,195,000. Other details follow 2017 2018 Costs incurred during the year 5695,310 $1,404,000 Estimated costs to complete, as of December 31921,690 0 Billings to date 426,000 2,195,000 Collections during the year 352,000 1,475,000 What portion of the total contract price would be recognized as revenue in 2017? In 2018? Revenue recognized in 2017 Revenue recognized in 2018 HOW LIST OF ACCOUNTS LINK TO TEXT Assuming the same facts as these above except that Marin uses the completed-contract method of accounting, what portion of the total contract price would be recognised as revenue in 2018? Revenue recognized in 2018

Answer 1

Solution 1:

Computation of % of completion, revenue recognition and Gross Profit - Marin construction company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D) (B/C)	Contract Price (E)	Total Revenue to be recoganized (F) (E * D)	Revenue for current period (G)	Gross Profit (H)
2017	$695,310	$695,310	$1,617,000	43.00%	$2,195,000	$943,850	$943,850	$248,540
2018	$1,404,000	$2,099,310	$2,099,310	100.00%	$2,195,000	$2,195,000	$1,251,150	-$152,850

Solution 2:

Revenue recognized for 2018 using completed contract method = $2,195,000

Solution 3:

Journal Entries - Marin Construction company - 2017
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$695,310.00
	To Various Accounts		$695,310.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$426,000.00
	To Billings on construction contract		$426,000.00
	(To record progress billings)
3	Cash Dr	$352,000.00
	To Accounts receivables		$352,000.00
	(To record collection from customer)
4	Construction in Progress Dr	$248,540.00
	Cost of construction Dr	$695,310.00
	To Revenue from long term contracts		$943,850.00
	(To record revenue and gross profit)