Question

Saved Help Save & MSK Construction Company contracted to construct a factory building for $525.000. Construction started during 20X1 and was completed in 20X2. Information relating to the contract follows: 20x2 $150,000 Costs incurred during the year Estimated additional cost to complete Billings during the year Cash collections during the year 20x1 $290,000 145,000 260,000 240,000 265,000 285,000 Required: 1. Record the preceding transactions in MSK's books assumingit 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 1 Required 2 Record the preceding transactions in MSK's books assuming it recognizes revenue over time and uses costs incurred to measure the extent to which is performance obligation has been satisfied. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction lit X Prepare the entry to record the construction costs incurred. Hint: Use Cash payables, materials, etc. Prepare the entry to record the amounts billed to the customer Prepare the entry to record the cash receipts from the customer Credit Prepare the entry to record the construction costs incurred. Hinti Use Cash, payables, materials, etc. O Prepare the entry to record the amounts bilied to the < Proy 8 of 30 ! Next >

Answer 1

No.	Date	General Journal	Debit	Credit
	20X1
1.		Construction in process	290,000
		Cash payables, materials		290,000
2.		Accounts receivables	260,000
		Billings on Contract		260,000
3.		Cash	240,000
		Accounts receivables		240,000
4.		Construction expense	290,000
		Construction in process	60,000
		Construction revenue		350,000
	20X2
5.		Construction in process	150,000
		Cash payables, materials		150,000
6.		Accounts receivables	265,000
		Billings on Contract		265,000
7.		Cash	285,000
		Accounts receivables		285,000
8.		Construction expense	150,000
		Construction in process	25,000
		Construction revenue		175,000
9.		Billings on Contract	525,000
		Construction in process		525,000

2)

No.	Date	General Journal	Debit	Credit
	20X1
1.		Construction in process	290,000
		Cash payables, materials		290,000
2.		Accounts receivables	260,000
		Billings on Contract		260,000
3.		Cash	240,000
		Accounts receivables		240,000
	20X2
4.		Construction in process	150,000
		Cash payables, materials		150,000
5.		Accounts receivables	265,000
		Billings on Contract		265,000
6.		Cash	285,000
		Accounts receivables		285,000
7.		Construction expense	440,000
		Billings on Contract	525,000
		Construction in process		440,000
		Construction revenue		525,000

Workings:

	20X1	20X2
Contract price	525,000	525,000
Less: Estimated cost
Costs incurred to date	290,000	150,000
Estimated cost to complete	145,000
Estimated total costs	435,000	150,000
Estimated gross profit	90,000	375,000
Percentage of completion	66.67%	100%
Gross profit earned	60,000	375,000
Less: Previous gross profit		60,000
Gross profit recognized	60,000	315,000