Question

1. Stanford Company has contracted to build for the City of New London a new courthouse. The estimated cost of the project is $6,000,000, and the contract price is $9,000,000. The courthouse took three years to complete as follows:

                                                2018                       2019                       2020
Costs to date                      $1,500,000           $4,000,000           $6,200,000
Cost to complete             $4,500,000           $2,200,000           $0

Amounts billed to date $1,400,000           $5,800,000           $9,000,000
Amounts collected to date
                                             $1,300,000           $4,300,000           $9,000,000

Determine the gross profit to be recognized for

                                         2018                           2019                   2020

Record all journal entries necessary for 2018 below:

Assume that Stanford uses the completed contract method. Determine the amount of revenue and expense to be recognized in:
                                                2018                       2019                      2020

Answer 1

Amount of Revenue, Expense and Gross Profit to be recognised is is:

	2018	2019	2020
Revenue Recognized	2250000	3556452	3193548
Expense Recognised	1500000	2500000	993548
Gross Profit Recognised	750000	1056452	993548

Working Note:

% of Completion
Actual Costs to date / Total Estimated costs = % of completion
	Actual Costs to date	Estimated total costs
2018	1500000	6000000	25%
2019	4000000	6200000	65%
2020	6200000	6200000	100%
2018
	To date	Recognised in previous year	Recognised in 2018
Construction Revenue	2250000	0	2250000
Construction Expense	1500000	0	1500000
Gross Profit (loss)	750000	0	750000
2019
	To date	Recognised in previous year	Recognised in 2019
Construction Revenue	5806452	2250000	3556452
Construction Expense	4000000	1500000	2500000
Gross Profit (loss)	1806452	750000	1056452
2020
	To date	Recognised in previous year	Recognised in 2020
Construction Revenue	9000000	5806452	3193548
Construction Expense	6200000	4000000	2200000
Gross Profit (loss)	2800000	1806452	993548

Journal Entries for 2018:

Date	General Journal	Debit	Credit
2018	Construction In progress	1500000
	Various accounts		1500000
2018	Accounts Receivables	1400000
	Bill on Construction Contract		1400000
2018	Cash	1300000
	Accounts Receivables		1300000
2018	Construction In Progress	750000
	Cost of Construcion	1500000
	Revenue from Contract		2250000