Question

Culver, Inc. began work on a $6,391,000 contract in 2017 to construct an office building. During 2017, Culver, Inc. incurred costs of $1,867,020, billed its customers for $1,209,000, and collected $908,000. At December 31, 2017, the estimated additional costs to complete the project total $3,178,980.

Prepare Culver’s 2017 journal entries using the percentage-of-completion method.

Answer 1

Solution:

Computation of % of completion, revenue recognition and Gross Profit - Culver Inc.
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D) (B/C)	Contract Price (E)	Total Revenue to be recoganized (F) (E * D)	Revenue for current period (G)	Gross Profit (H)
2017	$1,867,020	$1,867,020	$5,046,000	37.00%	$6,391,000	$2,364,670	$2,364,670	$497,650	$2,364,670 - $1,867,020

Journal Entries - Culver Inc.
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$1,867,020.00
	To Various Accounts		$1,867,020.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$1,209,000.00
	To Billings on construction contract		$1,209,000.00
	(To record progress billings)
3	Cash Dr	$908,000.00
	To Accounts receivables		$908,000.00
	(To record collection from customer)
4	Construction in Progress Dr	$497,650.00
	Cost of construction Dr	$1,867,020.00
	To Revenue from long term contracts		$2,364,670.00
	(To record revenue and gross profit)