Question

Fender Construction Company receives a contract to construct a building over a period of 3 years for a price of $700,000. The contract represents a single performance obligation that will be satisfied over time. Information relating to the performance of the contract is summarized as follows:

	2017	2018	2019
Construction costs incurred during the year	$150,000	$242,000	$168,000
Estimated costs to complete	350,000	168,000	—
Billings during the year	120,000	250,000	330,000
Collections during the year	100,000	260,000	340,000

Required:

1.	Prepare journal entries for all 3 years.
2.	Assume that the contract represents a single performance obligation that will be satisfied at a point in time. Prepare journal entries for all 3 years.

CHART OF ACCOUNTS
Fender Construction Company
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 155 Construction in Progress 156 Partial Billings 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 420 Construction Revenue EXPENSES 500 Construction Expense 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

	Assume the contract represents a single performance obligation that will be satisfied over time. Prepare journal entries on December 31 for all 3 years
1.	to record costs of construction for cash.
2.	to record partial billings.
3.	to record collections on account.
4.	to record gross profit recognized.
5.	to close out construction accounts in 2019.
	Additional Instruction

PAGE 2017

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9

PAGE 2018

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9

PAGE 2019

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11

	Assume that the contract represents a single performance obligation that will be satisfied at a point in time. Prepare journal entries on December 31 for all 3 years
1.	to record costs of construction for cash.
2.	to record partial billings.
3.	to record collections.
4.	to recognize revenue at completion on 2019.
5.	to recognize expense at completion on 2019.

PAGE 2017

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

PAGE 2018

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6

PAGE 2019

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

Answer 1

Part A

	2017	2018	2019
Construction costs incurred during the year	$150,000	$242,000	$168,000
Estimated costs to complete	350,000	168,000
Total Cost to Complete	500,000	410,000	168,000
Billings during the year	120,000	250,000	330,000
Collections during the year	100,000	260,000	340,000
Percentage Complete till Date	30%	59%	100%
Revenue Recognized	210,000	203,000	287,000
	(700,000 x .30)	(700,000 x .29)	(700,000 x .41)
Costs Incurred During the Year	150,000	242,000	168,000
GrosS Profit for the Year	60,000	-39,000	119,000

Dec 31 2017	Construction in progress	150,000
	Accounts Payable		150,000
Dec-31	Accounts Receivable	120,000
	PartialBilling		120,000
Dec-31	Cash	100,000
	Accounts Receivable		100,000
Dec-31	Construction Expenses	150,000
	Construction Progress	60,000
	Construction Revenue		210,000
Year 2018
Dec 31 2018	Construction in Progress	242,000
	Accounts Payable		242,000
Dec-31	Accounts Receivable	250,000
	Partial Billings		250,000
Dec-31	Cash	260,000
	Accounts Receivable		260,000
Dec-31	Construction Expenses	242,000
	Work in Progress		39000
	Construction Revenue		203,000
Year 2019
Dec 31 2019	Work in Progress	168,000
	Accoutns Payable		168,000
Dec-31	Accounts Receivable	330,000
	Partial Billing		330,000
Dec-31	Cash	340,000
	Accounts Receivable		340,000
Dec-31	Construction Expenses	168,000
	Work in Progress	119,000
	Construction Revenue		287,000
Dec-31	Billing	700,000
	Work in Progress		700,000

PART B

Part b
Dec 31 2017	Construction in progress	150,000
	Accounts Payable		150,000
Dec-31	Accounts Receivable	120,000
	PartialBilling		120,000
Dec-31	Cash	100,000
	Accounts Receivable		100,000
Year 2018
Dec 31 2018	Construction in Progress	242,000
	Accounts Payable		242,000
Dec-31	Accounts Receivable	250,000
	Partial Billings		250,000
Dec-31	Cash	260,000
	Accounts Receivable		260,000
Year 2019
Dec 31 2019	Work in Progress	168,000
	Accounts Payable		168,000
Dec-31	Accounts Receivable	330,000
	Partial Billing		330,000
Dec-31	Cash	340,000
	Accounts Receivable		340,000
Dec-31	Construction Expenses	168,000
	Work in Progress		168,000
Dec-31	Billing	700,000
	Work in Progress		700,000