Beavis Construction Company was the low bidder on a construction project to buil
ID: 2509299 • Letter: B
Question
Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2012 and completed in 2013. Cast and other data are presented below 2012 2013 Costs incurred during the year s 450,000 S1.100,000 Estimated costs to complete Billings during the year Cash collections during the year 1,050.000 400,000 1.400,000 300,000 1.500,000 Assume that Beavis uses the percentage-of-completion method for revenue recognition. Required: 1. Compute the amount of gross profit recognized during 2012 and 2013, 2. Prepare all journal entries related to the construction project in 2012 and 2013, 3. Prepare Statement of Financial Position end of 2012 and 201 3(if any).Explanation / Answer
1
2012
2013
Contract price
1800000
1800000
Actual costs to date
450000
450000
Estimated cost to complete
1050000
1100000
Total estimated projected costs
1500000
1550000
Estimated total gross profit
300000
250000
Percentage of completion
$450,000/$1,500,000
30%
Gross profit recognized
($300,000*30%)
$90,000
Profits recognized in 2015
$90,000
Profits to be recognized in 2016
$1,60,000
2
Journal entries
2012
Construction in progress
450000
Cash or Accounts Payable
450000
Accounts receivable
400000
Billings on construction contract
400000
Cash
300000
Account receivable
300000
Construction in progress
90000
Cost construction
450000
Revenue from long term contracts
540000
2013
Construction in progress
1100000
Cash or Accounts Payable
1100000
Accounts receivable
1400000
Billings on construction contract
1400000
Cash
1500000
Account receivable
1500000
Construction in progress
160000
Cost construction
1100000
Revenue from long term contracts
1260000
Billing on construction contract
1800000
Construction in progress
1800000
1
2012
2013
Contract price
1800000
1800000
Actual costs to date
450000
450000
Estimated cost to complete
1050000
1100000
Total estimated projected costs
1500000
1550000
Estimated total gross profit
300000
250000
Percentage of completion
$450,000/$1,500,000
30%
Gross profit recognized
($300,000*30%)
$90,000
Profits recognized in 2015
$90,000
Profits to be recognized in 2016
$1,60,000
2
Journal entries
2012
Construction in progress
450000
Cash or Accounts Payable
450000
Accounts receivable
400000
Billings on construction contract
400000
Cash
300000
Account receivable
300000
Construction in progress
90000
Cost construction
450000
Revenue from long term contracts
540000
2013
Construction in progress
1100000
Cash or Accounts Payable
1100000
Accounts receivable
1400000
Billings on construction contract
1400000
Cash
1500000
Account receivable
1500000
Construction in progress
160000
Cost construction
1100000
Revenue from long term contracts
1260000
Billing on construction contract
1800000
Construction in progress
1800000