Question

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In January 2019, Miller Construction Corp. contracted to construct a building for $3,600,000. Construction started in...

In January 2019, Miller Construction Corp. contracted to construct a building for $3,600,000. Construction started in early 2019 and was completed in 2020. The following additional information is available:

                                                                                          2019               2020

       Costs incurred...................................................... $1,458,000          $1,620,000

       Estimated costs to complete.................................. 1,560,000                         —

       Billed ……………………………………………….    1,700,000           1,900,000

       Collections during the year.................................... 1,440,000            2,160,000

Miller uses the percentage-of-completion method.

Instructions

Under the contract-based approach for percentage completion,

a) How much revenue should Miller report for 2019 and 2020?

b) Prepare all journal entries for 2019 and 2020 for this contract.

c)    What amounts would be presented on Miller’s December 31, 2019 Balance Sheet?

d)    What is the gross profit on the project for each of 2019 and 2020?

Solutions

Expert Solution

a & d)

2019 2020
Revenue Recognized 1739165 1860835
Gross Profit Recognised 281165 240835

Working Notes:

% of Completion
Actual Costs to date / Total Estimated costs = % of completion
Actual Costs to date Estimated total costs % Completion
2019 1458000 3018000 48.31%
2020 3078000 3078000 100.0%

b)

Date General Journal Debit Credit
2019 Construction In progress 1458000
Materials, Cash, Payables 1458000
2019 Accounts Receivables 1700000
Billings on Construction Contract 1700000
2019 Cash 1440000
Accounts Receivables 1440000
2019 Construction In Progress 281165
Construction Exp. 1458000
Revenue from Contract 1739165
Date General Journal Debit Credit
2020 Construction In progress 1620000
Materials, Cash, Payables 1620000
2020 Accounts Receivables 1900000
Billings on Construction Contract 1900000
2020 Cash 2160000
Accounts Receivables 2160000
2020 Construction In Progress 240835
Construction Exp. 1620000
Revenue from Contract 1860835

c)

Balance Sheet Partial 2021 2022
Current Assets:
Accounts Receivables 260000 0
Construction in Progress 1739165 3600000
Less: Billings -1700000 -3600000
Costs and Profits in excess of billings 39165 0


Working for Accounts Receivables: 2021 2022
Beginning Balance 0 260000
Billings 1700000 1900000
Less: Collections -1440000 -2160000
Closing Balance 260000 0

ekkarill92 answered 1 year ago
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