Question

Cullumber Construction Company uses the percentage-of-completion method of accounting. In 2020, Cullumber began work under a non-cancellable contract #E2-D2, which provided for a contract price of $2,178,000. Other details follow:

		2020		2021
Costs incurred during the year		$706,640		$1,422,000
Estimated costs to complete, as at December 31		899,360		0
Billings during the year (non-refundable)		420,000		1,713,600
Collections during the year		352,000		1,481,000

How much revenue should be recognized in 2020 and in 2021?

		2020		2021
Revenue to be recognized		$enter a dollar amount		$enter a dollar amount

Assuming the same facts as those above except that Cullumber uses the completed-contract method of accounting, how much revenue should be recognized in 2021?

		2021
Revenue to be recognized		$enter a dollar amount

  

  

Prepare a complete set of journal entries for 2020. (using the percentage-of-completion method. Use Materials, Cash, Payables for costs incurred to date.) (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.)

Account Titles and Explanation	Debit	Credit
enter an account title to record cost of construction	enter a debit amount	enter a credit amount
enter an account title to record cost of construction	enter a debit amount	enter a credit amount
(To record cost of construction)
enter an account title to record progress billings	enter a debit amount	enter a credit amount
enter an account title to record progress billings	enter a debit amount	enter a credit amount
(To record progress billings)
enter an account title to record collections	enter a debit amount	enter a credit amount
enter an account title to record collections	enter a debit amount	enter a credit amount
(To record collections)
enter an account title to record revenues	enter a debit amount	enter a credit amount
enter an account title to record revenues	enter a debit amount	enter a credit amount
(To record revenues)
enter an account title to record construction expenses	enter a debit amount	enter a credit amount
enter an account title to record construction expenses	enter a debit amount	enter a credit amount
(To record construction expenses)

Answer 1

Solution:

Computation of % of completion, revenue recognition and Gross Profit - Cullumber Construction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D) (B/C)	Contract Price (E)	Total Revenue to be recoganized (F) (E * D)	Revenue for current period (G)	Gross Profit (H) (G-A)
2020	$706,640	$706,640	$1,606,000	44.00%	$2,178,000	$958,320	$958,320	$251,680
2021	$1,422,000	$2,128,640	$2,128,640	100.00%	$2,178,000	$2,178,000	$1,219,680	-$202,320

revenue should be recognized in 2021 using completed contract method = $2,178,000

Journal Entries - Cullumber Construction Company - 2020
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$706,640.00
	To Materials, cash, payables		$706,640.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$420,000.00
	To Billings on construction contract		$420,000.00
	(To record progress billings)
3	Cash Dr	$352,000.00
	To Accounts receivables		$352,000.00
	(To record collection from customer)
4	Construction in Progress Dr	$706,640.00
	Cost of construction Dr	$251,680.00
	To Revenue from long term contracts		$958,320.00
	(To record revenue and gross profit)