Question

Question 2

0.73/1

View Policies

Show Attempt History

Current Attempt in Progress

Sage Construction Company began work on a $415,500 construction contract in 2020. During 2020, Sage incurred costs of $286,000, billed its customer for $209,500, and collected $178,500. At December 31, 2020, the estimated additional costs to complete the project total $152,650.

Prepare Sage’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract 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. Round answers to 0 decimal places, e.g. 5,275.)

No.	Account Titles and Explanation	Debit	Credit
(a)	enter an account title to record the transaction using the percentage-of-completion method	enter a debit amount	enter a credit amount
	enter an account title to record the transaction using the percentage-of-completion method	enter a debit amount	enter a credit amount
	enter an account title to record the transaction using the percentage-of-completion method	enter a debit amount	enter a credit amount
(b)	enter an account title to record the transaction using the completed-contract method	enter a debit amount	enter a credit amount
	enter an account title to record the transaction using the completed-contract method	enter a debit amount	enter a credit amount

eTextbook and Media

List of Accounts

Save for Later

Attempts: 2 of 3 used

Submit Answer

Your grade has been recorded in the Gradebook.

Wed, Apr 29, 2020, 9:07:49 PM (America/Los Angeles -07:00)

Answer 1

a.Percentage of completion method	Debit	Credit		Completed contract method	Debit	Credit
Incurring costs				Incurring costs
Construction-in-Progress(CIP)	286000			Construction-in-Progress(CIP)	286000
Cash/Accounts payable		286000		Cash/Accounts payable		286000
Billing the customer				Billing the customer
Accounts receivable	209500			Accounts receivable	209500
Billing on CIP		209500		Billing on CIP		209500
Collecting cash from customer				Collecting cash from customer
Cash	178500			Cash	178500
Accounts receivable		178500		Accounts receivable		178500
Revenues, expenses & profit/loss are recognised proportionate to % of completion				Revenues, expenses & profit/loss are recognised only on completion of the contract. Till, then they are accumulated , as above, in CIP a/cs.
Construction expense	286000
Construction-in-Progress(CIP)		15010.90		NO JOURNAL ENTRY
Construction Revenues		270989.10
(Loss of $ 15010.90 recognised )

Workings for % of completion method
Costs incurred todate	286000
Total estimated costs to complete= 286000+152500=	438500
so, % of work complete =
Costs incurred todate/Total estimated costs, ie.
286000/438500=	65.22%
So, revenue to be recognised,in this period=
% complete*(Contract price-Revenue recognised till previous yr.)
ie.65.22%*(415500-0)=	270989.10