Question

Tamarisk Construction Company began work on a $406,500 construction contract in 2020. During 2020, Tamarisk incurred costs of $292,500, billed its customer for $213,500, and collected $177,000. At December 31, 2020, the estimated additional costs to complete the project total $161,340.

Prepare Tamarisk’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

Answer 1

Requirement:

No	Account Titles and Explanation	Debit	Credit
a	Construction expenses	$      309,329
	Construction in process		$        47,340
	Revenue from long term contract		$      261,989
b	Loss from long term contract	$        47,340
	Construction in process		$        47,340

Working:

Contract price (a)	$      406,500
Actual cost to date (b)	$      292,500
Estimated cost to complete ( c)	$      161,340
Total estimated costs (b) +( c)	$      453,840
Estimated gross profit [406500-453840]	$       (47,340)
Percentage of completion [292500/453840]	64.45%
Revenue from long term contract [406500*64.45%]	$      261,989