Question

Marin Construction Company began work on a $424,000 construction contract in 2020. During 2020, Marin incurred costs of $279,500, billed its customer for $204,500, and collected $170,500. At December 31, 2020, the estimated additional costs to complete the project total $150,500. Prepare Marin’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.)

Answer 1

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Marin Construction Company
% of completion method	Calculation of Gross Profit
Particulars	2020
Contract Price	424,000	A
Cost Incurred during the year	279,500	B
Estimated cost to complete	150,500	C
Cost Incurred to date	279,500	D
(Sum total of the cost incurred during the year)
Estimated total cost	430,000	E=C+D
Percentage complete	65.00%	F=D/E
(Cost Incurred to date/Estimated total cost)
Revenue to be recognized	275,600	G
(Contract Price*Percentage complete)- revenue previously recognized
Year 2020: 45% completed. Revenue recognized = 45% x $ 424,000 = $ 275,600.
Gross Profit/(Loss)	(3,900.00)	H=G-B
Billings during the year	204,500.00
Collection during the year	170,500.00

Ans to 2	Journal Entries	2020
Costs Incurred	CIP (Work-in-progress) Dr.	279,500
	Cash Cr.	279,500
Billing	Accounts Receivable Dr.	204,500
	Billing on CIP Cr.	204,500
Receiving Payments	Cash Dr.	170,500
	Accounts Receivable Cr.	170,500
Period end adjustments for Revenue	Construction Expense Dr.	279,500
	CIP (Work-in-progress) Dr.	(3,900)
	Construction Revenue Cr.	275,600

	Completed Contract method
	Journal Entries	2020
Costs Incurred	Construction Expense Dr.	279,500
	Cash Cr.	279,500
Billing	Accounts Receivable Dr.	204,500
	Billing on CIP Cr.	204,500
Receiving Payments	Cash Dr.	170,500
	Accounts Receivable Cr.	170,500