Coronado Construction Company began work on a $407,000
construction contract in 2020. During 2020, Coronado incurred costs
of $272,000, billed its customer for $217,000, and collected
$177,500. At December 31, 2020, the estimated additional costs to
complete the project total $157,020.
Prepare Coronado’s journal entry to record profit or loss, if any,
using (a) the percentage-of-completion method and (b) the
completed-contract method.
Answer | |||
Explanation : | |||
Total estimated cost of the contract | |||
= $272,000 + $157,020 | |||
= $429,020 | |||
Loss on contract =$429,020 - $407,000 | |||
= $22,020 | |||
Percentage of completed construction = cost incurred/total estimated cost | |||
= $272,000 / $429,020 | |||
= 63.40% | |||
Construction revenue =$407,000 * 63.40% | |||
= $258,039 |
Journal entry | |||
No | Account Titles and Explanations | Debit | Credit |
a) | Contruction expenses | $ 2,80,059 | |
To, Construction in progress | $ 22,020 | ||
To, Construction revenue | $ 2,58,039 | ||
( To record loss on contract) | |||
b) | Loss from long term contracts | $ 22,020 | |
To, Construction in process | $ 22,020 | ||
( To record loss on contract) |
Coronado Construction Company began work on a $407,000 construction contract in 2020. During 2020, Coronado incurred...
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