Question

Nash Construction Company uses the percentage-of-completion method of accounting. In 2017, Nash began work under contract #E2-D2, which provided for a contract price of $2,234,000. Other details follow:

		2017		2018
Costs incurred during the year		$615,980		$1,420,000
Estimated costs to complete, as of December 31		1,005,020		–0–
Billings to date		413,000		2,234,000
Collections during the year		351,000		1,530,000

Prepare a complete set of journal entries for 2017 (using the percentage-of-completion 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. For costs incurred use account Materials, Cash, Payables.)

Account Titles and Explanation	Debit	Credit
(To record cost of of construction.)
(To record progress billings.)
(To record collections.)
(To recognize revenue.)

Answer 1

Solution

Accounts	Debit	Credit
Construction in process	$ 615,980
Cash		$ 615,980
(To record cost of Construction incurred during year)
Accounts receivables	$ 413,000
Billing on contract		$ 413,000
(To record billing to customer)
Cash	$ 35,100
Accounts Receivables		$ 35,100
(To record receipt of cash)
Construction expenses	$ 615,980
Construction in process	$ 232,940
Construction revenue		$ 848,920
(To record construction revenue)

Working

		2017
A	Contract Price	$ 2,234,000
B	Cost Incurred to Date	$ 615,980
C	Estimated cost yet to be incurred to complete the contract	$ 1,005,020
D = B+C	Total Cost	$ 1,621,000
E = (D/B) x 100	% of Completion	38%
F = A x E	Revenue to date	$ 848,920
G	Revenue of Previous year	$ 0
H = F - G	Net Revenue this year	$ 848,920