Question

Waterway Construction Company began work on a $417,400 construction contract in 2017. During 2017, Waterway incurred costs of $280,300, billed its customer for $216,200, and collected $176,500. At December 31, 2017, the estimated additional costs to complete the project total $162,000.

Prepare Waterway’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method.

Answer 1

(a) Percentage of Completion method :-

S.No	Account Titles	Debit	Credit
1	Construction in Process	280300
	Account Payable/Cash		280300
2	Account Receivable	216200
	Billings on CIP		216200
3	Cash	176500
	Account Receivable		176500
4	Construction Exp	280300
	CIP		15781
	Revenue on LTC (working Note)		264519

Working Note = Revenue on LTC :-

% of completion = cost incurred/Total estimated cost

Cost incurred = 280300

Total estimated cost = 280300 + 162000 = 442300

% = 280300/442300 = 63.373%

Revenue recognized = 417400 * 63.373% = 264519

(b) Completed contract method :-

S.No	Account Titles	Debit	Credit
1	Construction in Process	280300
	Account Payable/Cash		280300
2	Account Receivable	216200
	Billings on CIP		216200
3	Cash	176500
	Account Receivable		176500