Beavis Construction Company was the low bidder on a construction project to buil
ID: 2528085 • Letter: B
Question
Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,720,000. The project was begun in 2015 and completed in 2016. Cost and other data are presented below: 2015 2016 Costs incurred during the year $ 411,000 $1,020,000 Estimated costs to complete 959,000 0 Billings during the year 465,000 1,310,000 Cash collections during the year 365,000 1,410,000 Assume that Beavis recognizes revenue on this contract over time according to percentage of completion. Required: Prepare all journal entries to record costs, billings, collections, and profit recognition. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
2015:
Contract price $17,20,000
Actual costs to date $411000
Estimated costs to complete $951000
Total estimated project costs $13,62,000
Estimated total gross profit $3,58,000
Percentage of completion:
($411000 / 1362000) 30%
Gross profit recognized $1,07,400
2016:
Contract price $17,20,000
Costs incurred:
2015 $4,11,000
2016 $10,20,000
Total cost $14,31,000
Total gross profit $2,89,000
Recognized in 2015 $1,07,400
Recognized in 2016 $1,81,600
Journal entries to record costs, billings, collections, and profit recognition
2015
Dr Construction in progress 411,000
Cr Cash or A/P 411,000
Dr Accounts receivable 465,000
Cr Billings on construction contract 465,000
Dr Cash 365,000
Cr Accounts receivable 365,000
Dr Construction in progress 1,07,400
Dr Cost of construction 411,000
Cr Revenue from long-term contracts 5,18,400
2016:
Dr Construction in progress 10,20,000
Cr Cash or A/P 10,20,000
Dr Accounts receivable 13,10,000
Cr Billings on construction contract 13,10,000
Dr Cash 14,10,000
Cr Accounts receivable 14,10,000
Dr Construction in progress 1,81,600
Dr Cost of construction 10,20,000
Cr Revenue from long-term contracts 12,01,600
Dr Billings on construction contract 17,20,000
Cr Construction in progress 17,20,000