Question

Stellar, Inc. began work on a $6,491,000 contract in 2020 to construct an office building. During 2020, Stellar, Inc. incurred costs of $1,941,020, billed its customers for $1,138,000, and collected $904,000. At December 31, 2020, the estimated additional costs to complete the project total $3,304,980.

Prepare Stellar’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

• Journal entries asked

Date	Accounts title	Debit	Credit
2020	Construction in Progress	$1,941,020
	Materials, Cash, Payables		$1,941,020
	(construction cost incurred)
2020	Accounts receivables	$1,138,000
	Billing on Construction contracts		$1,138,000
	(amount billed during the year)
2020	Cash	$904,000
	Accounts receivables		$904,000
	(cash received)
2020	Construction in Progress	$460,650
	Cost of construction or Construction expense	$1,941,020
	Revenue from Long Term contract		$2,401,670
	(revenue recognised)

• Workings

Working		2020
A	Contract Price	$6,491,000
B	Cost Incurred to Date	$1,941,020
C	Estimated cost yet to be incurred to complete the contract	$3,304,980
D = B+C	Total Cost	$5,246,000
E = (B/D) x 100	% of Completion	37.00%
F = A x E	Revenue to date	$2,401,670
G	Revenue of Previous year	$0
H = F - G	Net Revenue this year	$2,401,670
I (=B)	Cost to date	$1,941,020
J	Cost to date of previous year	$0
K = I - J	Net Cost for the year	$1,941,020
L = H - K	Gross Profits	$460,650