Question

Exercise 18-33 During 2017, Marin Company started a construction yob with a contract price of $1,610,000. The job was completed in 2019. The following information is available, 2017 2018 2019 Costs incurred to date $405,900 $766,500 51,076,000 Estimated costs to complete 584,100 328,500 Brings to date 300,000 893,000 1,610,000 Collections to date 267,000 809,000 1,435,000 Compute the amount of gross profit to be recognized each year, assuming the percentage of completion method is used. Gross proft recognized in 2017 Gross profit recognized in 2018 Gross profit recognized in 2019

Answer 1

Solution 1:

Computation of % of completion, revenue recognition and Gross Profit - Marin 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	$405,900	$405,900	$990,000	41.00%	$1,610,000	$660,100	$660,100	$254,200
2018	$360,600	$766,500	$1,095,000	70.00%	$1,610,000	$1,127,000	$466,900	$106,300
2019	$309,500	$1,076,000	$1,076,000	100.00%	$1,610,000	$1,610,000	$483,000	$173,500

Solution 2:

Journal Entries - Marin company - 2018
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$360,600.00
	To Various Accounts		$360,600.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$593,000.00
	To Billings on construction contract		$593,000.00
	(To record progress billings)
3	Cash Dr	$542,000.00
	To Accounts receivables		$542,000.00
	(To record collection from customer)
4	Construction in Progress Dr	$106,300.00
	Cost of construction Dr	$360,600.00
	To Revenue from long term contracts		$466,900.00
	(To record revenue and gross profit)

Solution 3:

Computation of Gross Profit - Revenue on completion - Marin Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	Contract Price (D)	Gross Profit
2017	$405,900	$405,900	$990,000	$1,610,000	$0
2018	$360,600	$766,500	$1,095,000	$1,610,000	$0
2019	$309,500	$1,076,000	$1,076,000	$1,610,000	$534,000