Question

Raider Red Construction entered into a contract to build a commercial building for $3,600,000. Raider Red Construction uses the percentage-of-completion method for recognizing revenue on the project. Construction began in September of 2018 and the building was completed in June of 2020. The company provided the following additional information on the project.

	2018	2019	2020
Costs incurred to date	$                 725,000	$              2,100,000	$              3,400,000
Estimated costs to complete	$              2,175,000	$              1,400,000	$                             -
Billings during the year	$                 800,000	$              1,650,000	$              1,150,000
Cash collected during the year	$                 450,000	$              1,900,000	$              1,200,000

Instructions:

(1.) Prepare the journal entries for the balance sheet in each year of the project.

Answer 1

Journal Entry
Year	2,018			2,019			2,020
Account Titles	Debit $	Credit $		Debit $	Credit $		Debit $	Credit $
Construction in Progress(Asset)	725,000			2,100,000			34,,0,000
Accounts Payable		725,000			2,100,000			3,400,000
Accounts Receivable	800,000			1,650,000			1,150,000
Billings on Construction in Progress		800,000			1,650,000			1,150,000
(Being Billing made)
Cash	450,000			1,900,000			1,200,000
Accounts Receivable		450,000			1,900,000			1,200,000
(Being Cash Colected)
Construction Expenses	725,000			2,100,000			3,400,000
Construction in Progress-Asset(Gross profit)	175,000			60,000			200,000
Revenue on Long Term Contract		900,000			2,160,000			3,600,000

Working:
	2018	2019	2020
Contract Value	3,600,000	3,600,000	3,600,000
Costs to date	725,000	2,100,000	3,400,000
Estimated Costs to complete	2,175,000	1,400,000	-
Progress Billings during the year	800,000	1,650,000	1,150,000
Cash Collected During the year	450,000	1,900,000	1,200,000
Contract Price	3,600,000	3,600,000	3,600,000
Cost to date	725,000	2,100,000	3,400,000
Estimated Costs to complete	2,175,000	1,400,000	-
Total Estimated Cost	2,900,000	3,500,000	3,400,000
% of Completion( Cost to date / Total estimated cost)	25%	60%	100%
Revenue to date(3,600,000 x % completeion)	900,000	2,160,000	3,600,000
Gross Profit to date (Revenue to date - Cost to date)	175,000	60,000	200,000