Homework Answers
Answer -
Journal entries :
1.
| Date | General Journal | Debit | Credit |
| 2020 | Construction in progress | $458500 | |
| Cash or Accounts payable | $458500 |
2.
| Date | General Journal | Debit | Credit |
| 2020 | Accounts receivable | $495000 | |
| Billing on construction Contract | $495000 |
3.
| Date | General Journal | Debit | Credit |
| 2020 | Cash | $395000 | |
| Accounts receivable | $395000 |
4.
| Date | General Journal | Debit | Credit |
| 2020 | Construction in progress | $164500 | |
| Cost of construction | $458500 | ||
| Revenue from long-term contracts | $623000 |
5.
| Date | General Journal | Debit | Credit |
| 2021 | Construction in progress | $1080000 | |
| Cash or Accounts payable | $1080000 |
6.
| Date | General Journal | Debit | Credit |
| 2021 | Accounts receivable | $1285000 | |
| Billing on construction Contract | $1285000 |
7.
| Date | General Journal | Debit | Credit |
| 2021 | Cash | $1385000 | |
| Accounts receivable | $1385000 |
8.
| Date | General Journal | Debit | Credit |
| 2021 | Construction in progress | $77000 | |
| Cost of construction | $1080000 | ||
| Revenue from long-term contracts | $1157000 |
9.
| Date | General Journal | Debit | Credit |
| 2021 | Billing on construction Contract | $1780000 | |
| Construction in progress | $1780000 |
Calculation :
| 2020 | 2021 | ||
| Percent complete | Actual cost incurred / (Total actual costs + Estimated cost to date) | $458500 / ($458500 + $851500) = 35% | 100% |
| Revenue recognized | (Total estimated revenue * Percent complete) - Previous revenue recognized | ($1780000 * 35%) - $0 = $623000 | $1780000 - $623000 = $1157000 |
| Gross profit recognized | Revenue recognized - Actual cost incurred | $623000 - $458500 = $77000 | $1157000 - $1080000 = $77000 |
Total billings = $495000 ( During Year 2020) + $1285000 (During Year 2021)
Total billings = $1780000
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