Question

Crane Construction Inc., which has a calendar year end, has entered into a non-cancellable fixed price contract for $2.9 million beginning September 1, 2020, to build a road for a municipality. It has been estimated that the road construction will be complete by June 2022. The following data pertain to the construction period.

		2020		2021		2022
Costs to date		$848,000		$1,871,250		$2,428,000
Estimated costs to complete		1,802,000		623,750		0
Progress billings to date (non-refundable)		890,000		2,378,000		2,900,000
Cash collected to date		748,000		2,271,000		2,900,000

Using the percentage-of-completion method, calculate the estimated gross profit that would be recognized during each year of the construction period.

CRANE CONSTRUCTION INC.
STATEMENT OF GROSS PROFIT
	2020	2021	2022	Total
Revenue	$928,000	$1,247,000	$725,000	$2,900,000
Costs	($848,000)	($1,023,250)	($556,750)	($2,428,000)
Gross profit	$80,000	$223,750	$168,250	$472,000

Using the percentage-of-completion method, prepare the journal entries for 2020 and 2021. (Use Materials, Cash, Payables for costs incurred to date.)

For the Year 2020:

1-

2-

(To record Cost of Construction)

1-

2-

To record progress billings

1-

2-

To record collections

1-

2-

To record revenues

1-

2-

To record construction expenses

Same procedures for 2021:

Answer 1

following are the calculations as per percentage methods or degree of completion method

journal entries: