Question

Splish, Inc. began work on a $6,312,000 contract in 2020 to construct an office building. During 2020, Splish, Inc. incurred costs of $1,589,940, billed its customers for $1,156,000, and collected $894,000. At December 31, 2020, the estimated additional costs to complete the project total $3,228,060.

Prepare Splish’s 2020 journal entries using the percentage-of-completion method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For costs incurred use account Materials, Cash, Payables. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account title to record costs incurred	enter a debit amount	enter a credit amount
enter an account title to record costs incurred	enter a debit amount	enter a credit amount
(To record costs incurred.)
enter an account title to record billings	enter a debit amount	enter a credit amount
enter an account title to record billings	enter a debit amount	enter a credit amount
(To record billings.)
enter an account title to record collections	enter a debit amount	enter a credit amount
enter an account title to record collections	enter a debit amount	enter a credit amount
(To record collections.)
enter an account title to recognize revenue	enter a debit amount	enter a credit amount
enter an account title to recognize revenue	enter a debit amount	enter a credit amount
enter an account title to recognize revenue	enter a debit amount	enter a credit amount
(To recognize revenue.)

Answer 1

Account Titles and Explanation	Debit	Credit
Construction in Process	$1,589,940
Materials,Cash, Payables, etc		$1,589,940
(To record costs incurred.)
Accounts Receivable	$1,156,000
Billingson Construction in Process		$1,156,000
(To record billings.)
Cash	$894,000
Accounts Receivable		$894,000
(To record collections.)
Construction in Process [1494000*33%]	$493020
Construction Expenses	$1,589,940
Revenue from Long-Term Contracts (6,312,000*33%)		$2082960
(To recognize revenue.)

Working:

Total Cost   =   Cost Incurred + the estimated future costs to complete the project

                  =$1,589,940+$3,228,060 = $4818000

Total Profit = Contract Value -Total cost

=$6,312,000-4818000 = $1494000

Percent of Completion = Cost Incurred / Total Cost

                                    =   $1,589,940/ 4818000

                                    =   33%