Question

During 2020, Blossom Company started a construction job with a contract price of $1,610,000. The job was completed in 2022. The following information is available. 2020 2021 2022 Costs incurred to date $393,900 $760,380 $1,059,000 Estimated costs to complete 616,100 341,620 –0– Billings to date 299,000 905,000 1,610,000 Collections to date 268,000 818,000 1,421,000

(a) Your answer is correct. Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. Gross profit recognized in 2020 $enter a dollar amountenter a dollar amount Gross profit recognized in 2021 $enter a dollar amountenter a dollar amount Gross profit recognized in 2022 $enter a dollar amountenter a dollar amount SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT Attempts: 2 of 3 used

(b) Prepare all necessary journal entries for 2021. (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 enter an account title to record cost of constructionenter an account title to record cost of construction enter a debit amountenter a debit amount enter a credit amountenter a credit amount enter an account title to record cost of constructionenter an account title to record cost of construction enter a debit amountenter a debit amount enter a credit amountenter a credit amount (To record cost of construction.) enter an account title to record progress billingsenter an account title to record progress billings enter a debit amountenter a debit amount enter a credit amountenter a credit amount enter an account title to record progress billingsenter an account title to record progress billings enter a debit amountenter a debit amount enter a credit amountenter a credit amount (To record progress billings.) enter an account title to record collectionsenter an account title to record collections enter a debit amountenter a debit amount enter a credit amountenter a credit amount enter an account title to record collectionsenter an account title to record collections enter a debit amountenter a debit amount enter a credit amountenter a credit amount (To record collections.) enter an account title to recognize revenueenter an account title to recognize revenue enter a debit amountenter a debit amount enter a credit amountenter a credit amount enter an account title to recognize revenueenter an account title to recognize revenue enter a debit amountenter a debit amount enter a credit amountenter a credit amount enter an account title to recognize revenueenter an account title to recognize revenue enter a debit amountenter a debit amount enter a credit amountenter a credit amount (To recognize revenue.)

Answer 1

Amount of Gross profit to be recognised each year

	2020	2021	2020
Contract price	$        1,610,000	$    1,610,000	$             1,610,000
Less: Estimated cost
Cost incurred to date	$            393,900	$        760,380	$             1,059,000
Estimated cost to complete	$616,100	$341,620
Estimated total cost	$1,010,000	$1,102,000	$1,059,000
Estimated gross profit	$600,000	$508,000	$551,000
Percent complete	39%	69%	100%
Revenue recognised in prior years	0	$234,000	$116,520
Total revenue recognized	$234,000	$350,520	$551,000
Gross profit recognized	$234,000	$116,520	$200,480

Journal entry

PARTICULERS	DEBIT	CREDI
Construction in process ($760,380-$393,900)	$366,480
Materials, cash, payable etc		$366,480
(To record cost of construction)
Accounts receivable ($905,000-$299,000)	$606,000
Billings on construction in process		$606,000
(To record process Billings)
Cash ($818,000-$268,000)	$550,000
Accounts receivable		$550,000
(To record Collections)
Construction in process	$366,480
Construction expense	$116,520
Revenue from long-term construction		$483,000
($1,610,000*(69%-39%) = $483,000