Beavis Construction Company was the low bidder on a construction project to buil
ID: 2513418 • 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. Cost and other data are presented below 2013 $ 1.100,000 Costs incurred during the year Estimated costs to complete Billings during the year Cash collections during the year $450,000 1,050,000 400,000 300,000 0 1,400,000 1,500,000 Assume that Beavis uses the percenta recognition. ge- of- completion method for revenue 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 2013 (if any)Explanation / Answer
Computation of % Completion & Gross Profit 2012 2013 Contract price $1,800,000 $1,800,000 Estimated cost: Cost To date $450,000 $1,550,000 Estimated costs To Complete $1,050,000 $0 Estimated Total costs $1,500,000 $1,550,000 % Completed 30% 100% Estimated Total gross profit $300,000 $250,000 Total Gross profit To be Recognized $90,000 $250,000 Gross profit Recognized in pRevious years $0 $90,000 Gross profit Recognized during the current year $90,000 $160,000 JOURNAL ENTRIES: Date AccountTittle & Explanation Debit Credit 2012 Construction In Progress $450,000 Material /Cash/Payable $450,000 To Record Cost Incurred Account Receivable $400,000 Billing on Construction under Progress $400,000 To Record Billing Cash $300,000 Accounr Receivab;e $300,000 To Record Collection Construction in Process (gross profit) $90,000 Construction Expenses $450,000 Revenue from long term Contracts $540,000 (To Record Revenue and gross profit) 2013 Construction in process $1,100,000 Materials/Cash/payables $1,100,000 (To Record costs incurred) Accounts Receivable Billings on Construction in process $1,400,000 (To Record Billings) $1,400,000 Cash $1,500,000 Accounts Receivable $1,500,000 (To Record collections) Construction in process (gross profit) $160,000 Construction Expenses $1,100,000 Revenue from long term Contracts $1,260,000 (To Record Revenue and gross profit) Billings on Construction in process $1,800,000 Construction in process $1,800,000 (To Record Completion of Contract)