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A company began work in 2020 on a contract for $7,800. Other data are as follows:...

A company began work in 2020 on a contract for $7,800. Other data are as follows:

   

                                                   2020                         2021

Costs incurred to date                 $3,000 $5,600

Estimated costs to complete         2,000       —

Billings to date    4,400                   7,800

Collections to date                       2,000                      4,800

If the company uses the percentage-of-completion method, for the journal entry that records construction revenue, construction expense, and gross profit for 2020, how much will be recorded for Construction in Process?

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A Company
Particulars 2020 2021 Note
Contract Price    7,800      7,800 A
Cost Incurred during the year    3,000      2,600 C
Cost Incurred to date    3,000      5,600
Estimated cost to complete    2,800 D
Estimated total cost    5,800      5,600 E=C+B
(Cost Incurred to date+ Estimated cost to complete )
Percentage complete 51.72% 100.00% F=B/E
(Cost Incurred to date/Estimated total cost)
Revenue to be recognized    4,034      3,766 G
Gross Profit/(Loss)    1,034      1,166 H=G-C
Calculation of revenue to be recognized
(Contract Price*Percentage complete)- revenue previously recognized
Year 2020: 51.72% completed. Revenue recognized = 51.72% x $ 7,800 = $ 4,034.
So Construction in Process recorded will be revenue to be recognized i.e. $ 4,034.

ekkarill92 answered 2 years ago
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