Question

Rajbir Construction Co. contracted to build a bridge for $10,000,000. Construction began in 2018 and was completed in 2019. Data relating to the construction are: 2018 2019 Costs incurred during the year $3,300,000 $2,750,000 Estimated costs to complete 2,700,000 — Raj uses the percentage-of-completion method. Instructions (a) How much revenue should be reported for 2018? Show your computation. (b) Make the entry to record progress billings of $4,100,000 during 2018. (c) Make the entry to record the revenue and gross profit for 2018. (d) How much gross profit should be reported for 2019? Show your computation.

Answer 1

1)

	2018	2019
Cost incurred	3,300,000	2,750,000
Estimated cost to complete	2,700,000
Revenue for 2018	3,300,000	Multiply	10,000,000
	6,000,000
Revenue for 2018 55,00,000

2) Account Receivables Dr. 3,300,000
Billing on construction in process Cr. 3,300,000

3) Construction expenses Dr. 3,300,000
Construction in Process Dr. 2,200,000

Revenue fro long term contracts Cr. 5,500,000

4)
Total Revenue Dr. 10,000,000
Recognized in 2018 (5,500,000)
Recognized in 2019 (4,500,000)
Costs in 2018 (2,750,000)
Gross profit 2018 1,750,000