In: Accounting
A company began work in 2020 on a contract for $7,800. Other data are as follows:
2020 | 2021 | |
costs incurred to due | $3,000 | 5,600 |
estimated costs to complete | 2,000 | ---------- |
Billings to date | 3,100 | 7,800 |
collections to date | 1,000 | 4,400 |
If the company uses the percentage-of-completion method, for the journal entry that records construction revenue, construction expense, and gross profit for 2020, how much will be recorded for Construction in Process?
2020 | 2021 | |
Cost Incurred to Due (A) | $ 3,000 | $ 5,600 |
Estimated cost to complete (B) | $ 2,000 | $ - |
Total Cost (C) (C=A+B) | $ 5,000 | $ 5,600 |
Percentage of Completion {(A/C)*100} | 60% | 100% |
Contract Price | $ 7,800 | $ 7,800 |
Revenue to date (D) ( Contract Price*Percentage of Completion | $ 4,680 | $ 7,800 |
Revenue of Previous year {E} | $ - | $ 4,680 |
Net Revenue this year ( D-E ) | $ 4,680 | $ 3,120 |
Cost to date (F ) (C*Percentage of Completion ) | $ 3,000 | $ 5,600 |
Cost to date of previous year (G) | $ - | $ 3,000 |
Net Cost for the year ( F-G ) | $ 3,000 | $ 2,600 |
Gross Profits ( Net Revenue - Net Cost ) | $ 1,680 | $ 520 |
Based on the above workings,
Construction Revenue for 2020 and 2021 are $ 4,680 and $ 3,120 respectively.
Construction Cost for 2020 and 2021 are $ 3,000 and $ 2,600 respectively.
Gross Profit for 2020 and 2021 are $ 1,680 and $ 520 respectively.