Question

Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2015 and completed in 2016. Cost and other data are presented below:

	2012	2013
Costs incurred during the year	$ 450,000	$1,100,000
Estimated costs to complete	1,050,000	0
Billings during the year	400,000	1,400,000
Cash collections during the year	300,000	1,500,000

Assume that Beavis recognizes revenue on this contract over time according to percentage of completion.

Required:

Perpare all journal entries related to the construction project in 2012 and 2013

Answer 1

Ans)

2015:

Contract price $1,800,000

Actual costs to date $450,000

Estimated costs to complete 1,050,000

Total estimated project costs 1,500,000

Estimated total gross profit 300,000

Percentage of completion: $450,000/ $1,500,000 = 30%

Gross profit recognized = $90,000

2016: Contract price $1,800,000

Costs incurred: 2015 $450,000

2016 1,100,000

Total cost 1,550,000

Total gross profit 250,000

Recognized in 2015 90,000

Recognized in 2016 $160,000

2015:

Construction in progress 450,000

Cash or A/P 450,000

Accounts receivable 400,000

Billings on construction contract 400,000

Cash 300,000

Accounts receivable 300,000

Construction in progress 90,000

Cost of construction 450,000

Revenue from long-term contracts 540,000

2016:Construction in progress 1,100,000

Cash or A/P 1,100,000

Accounts receivable 1,400,000

Billings on construction contract 1,400,000

Cash 1,500,000

Accounts receivable 1,500,000

Construction in progress 160,000

Cost of construction 1,100,000

Revenue from long-term contracts 1,260,000

Billings on construction contract 1,800,000

Construction in progress 1,800,000