Question

Pinetree Builders has the following data for its Rolling Hills Construction Project. The contract price of the project is $18,000,000. Complete the following table with the required information using the percentage of completion method.

	2016	2017	2018
Costs incurred to date	$4,500,000	$10,500,000	$15,500,000
Estimated costs to complete	10,500,000	2,625,000
Billings during the year	6,600,000	8,400,000	3,000,000
Cash collections during the year	6,000,000	6,000,000	6,000,000
Estimated total costs
Estimated total profit
Percentage of Completion
Revenue Recognized in each year
Profit recognized in each year
Current Asset
Current Liabilities

Required

1.         Enter the appropriate amounts in the shaded cells above.

2.         Prepare the required journal entries for 2016, 2017 and 2018.

Date	Accounts Title and Explanation	Ref.	Debit	Credit

Answer 1

		2016		2017		2018
a	Costs incurred to date	$4,500,000		$10,500,000		$15,500,000
b	Estimated costs to complete	10,500,000		2,625,000		0
c	Billings during the year	6,600,000		8,400,000		3,000,000
d	Cash collections during the year	6,000,000		6,000,000		6,000,000
e=a+b	Estimated total costs	$15,000,000	(4500000+10500000)	$13,125,000	(10500000+2625000)	$15,500,000	(15500000+0)
f=Total contract revenue-e	Estimated total profit	$3,000,000	(18000000-15000000)	$4,875,000	(18000000-13125000)	$2,500,000	(18000000-15500000)
g=a/e*100	Percentage of Completion	30%	(4500000/15000000)*100	80%	(10500000/13125000)*100	100%	(15500000/15500000)*100
h=total contract revenue*% increase in completion	Revenue Recognized in each year	5400000	(18000000*30%)	9000000	(18000000*(80%-30%))	3600000	(18000000*(100%-80%))
i=(f*g)-profit recognised till date	Profit recognized in each year	$900,000	(3000000*30%)-0	$3,000,000	(4875000*80%)-900000	($1,400,000)	(2500000*100%)-(900000+3000000)
j=refer working note	Current Asset	6,600,000		15,000,000		18,000,000
k=a	Current Liabilities	$5,700,000		$11,100,000		$15,500,000
	Current assets
	Cash	6,000,000		12,000,000	(6000000+6000000)	18,000,000	(6000000+12000000)
(opening trade receivable+Billing done during the year-cash collection during the year)	Trade Receivable	600,000	(0+6600000-6000000)	3,000,000	(600000+8400000-6000000)	0	(3000000+3000000-6000000)
(Revenue recognised till date-billing done till date)	Amount due from customer	6,600,000		15,000,000		18,000,000
	Total
	Current liability
(billing done till date-revenue recognisedtill date)	Amount due to customer	1,200,000		$600,000		0	(18000000-18000000)
k=a	Trade payable	$4,500,000		$10,500,000		$15,500,000
		5,700,000		$11,100,000		15500000
	Year1
1	Construction in Progress	$4,500,000
	Trade Payable		$4,500,000
2	Accounts Receiavble	6,600,000
	Billing on construction Contract		6,600,000
3	Cash	6,000,000
	Trade Receivable		6,000,000
4	Construction in progress	$900,000
	Construction Expense	$4,500,000
	Construction Revenue		5400000
5	Billing on construction Contract	1,200,000
	Amount due to customer		1,200,000
	Year2
1	Construction in Progress	$6,000,000	(10500000-4500000)	cost incurred during year
	Trade Payable		$6,000,000
2	Accounts Receiavble	8,400,000
	Billing on construction Contract		8,400,000
3	Cash	6,000,000
	Trade Receivable		6,000,000
4	Construction in progress	$3,000,000
	Construction Expense	6,000,000
	Construction Revenue		9000000
5	Billing on construction Contract	600,000
	Amount due to customer		600,000
	Year3
1	Construction in Progress	$15,500,000
	Trade Payable		$15,500,000
2	Accounts Receiavble	3,000,000
	Billing on construction Contract		3,000,000
3	Cash	6,000,000
	Trade Receivable		6,000,000
4	Construction Expense	$5,000,000
	Construction Revenue		3600000
	Construction in progress		$1,400,000