Question

Crane, Inc. began work on a $7,016,000 contract in 2020 to construct an office building. During 2020, Crane, Inc. incurred costs of $1,798,560, billed its customers for $1,125,000, and collected $910,000. At December 31, 2020, the estimated additional costs to complete the project total $3,197,440.

Prepare Crane’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

Answer
1		2020
	Contract price (a)	$      7,016,000
	Actual costs to date	$      1,798,560
	Estimated costs to complete	$      3,197,440
	Total estimated costs (b)	$      4,996,000
	Estimated (actual) gross profit (a-b)	$      2,020,000
	Percentage-of-completion = $1,798,560/$4,996,000=	36%
	Gross Profit recognition:	$         727,200
	(36% x $2,020,000)

Date	Accounts and Explanation	Debit	Credit
2020	Construction in process	$      1,798,560
	Materials, Cash, Payables		$      1,798,560
	(To record the cost incurred)
2020	Accounts receivable	$      1,125,000
	Billings on Construction in process		$      1,125,000
	(To record billings)
2020	Cash	$         910,000
	Accounts Receivable		$         910,000
	(To record the collections)
2020	Construction in process	$         727,200
	Construction Expenses	$      1,798,560
	Revenue from Long-term Contracts		$      2,525,760