Question

Windsor Construction Company began work on a $404,000 construction contract in 2020. During 2020, Windsor incurred costs of $273,000, billed its customer for $232,000, and collected $182,000. At December 31, 2020, the estimated additional costs to complete the project total $163,660.

Prepare Windsor’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

No.	Account Titles and Explanation	Debit	Credit
(a)	enter an account title to record the transaction using the percentage-of-completion method	enter a debit amount	enter a credit amount
	enter an account title to record the transaction using the percentage-of-completion method	enter a debit amount	enter a credit amount
	enter an account title to record the transaction using the percentage-of-completion method	enter a debit amount	enter a credit amount
(b)	enter an account title to record the transaction using the completed-contract method	enter a debit amount	enter a credit amount
	enter an account title to record the transaction using the completed-contract method	enter a debit amount	enter a credit amount

Answer 1

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Windsor
Percentage of completion method:
Calculation of Gross Profit
Particulars	2020
Contract Price	404,000		A
Cost Incurred during the year	273,000		B
Estimated cost to complete	163,660		C
Cost Incurred to date	273,000		D
(Sum total of the cost incurred during the year)
Estimated total cost	436,660		E=C+D
Percentage complete	62.52%		F=D/E
(Cost Incurred to date/Estimated total cost)
Revenue to be recognized	252,581		G
(Contract Price*Percentage complete)- revenue previously recognized
Year 2020: 362.52% completed. Revenue recognized = 62.52% x $ 4,04,000 = $ 252,581.
Gross Profit/(Loss)	(20,419.04)		H=G-B
Billings during the year	232,000.00
Collection during the year	182,000.00

Journal Entries		Debit	Credit
Costs Incurred	CIP (Work-in-progress)	273,000
	Cash Cr.		273,000
Billing	Accounts Receivable	232,000
	Billing on CIP		232,000
Receiving Payments	Cash	182,000
	Accounts Receivable		182,000
Period end adjustments for Revenue	Construction Expense	273,000
	CIP (Work-in-progress)		20,419
	Construction Revenue		252,581

Completion contract method:
Journal Entries
Costs Incurred	CIP (Work-in-progress)	273,000
	Cash Cr.		273,000
Billing	Accounts Receivable	232,000
	Billing on CIP		232,000
Receiving Payments	Cash	273,000
	Accounts Receivable		273,000