Question
In: Accounting
Hardhat has a contract to construct a $5,000,000 bridge at an estimated cost of $4,000,000. The...
Hardhat has a contract to construct a $5,000,000 bridge at an estimated cost of $4,000,000. The
contract is to start in 2016 and will be completed in 2018. Below is the data for 2016-18:
2016 2017 2018
Costs to date 1,000,000 2,900,000 4,100,000
Est. costs to complete 3,000,000 1,200,000 -
Progress billings during year 900,000 2,400,000 1,700,000
Cash collected during year 750,000 2,250,000 2,000,000
Compute the percentage of completion, and record the journal entries to recognize revenue,
expenses, and gross profit for 2016-18 using the percentage of completion method (Do not
record journal entries for costs incurred, progress billings, and cash collected during 2016-18)?
Solutions
Expert Solution
| Contract price | $5,000,000 | ||||||||
| 2016 | 2017 | 2018 | |||||||
| Cost incurred to date | $1,000,000 | $2,900,000 | $4,100,000 | ||||||
| Estimated costs to complete | $3,000,000 | $1,200,000 | $0 | ||||||
| Billings to date | $900,000 | $2,400,000 | $1,700,000 | ||||||
| Collections per year | $750,000 | $2,250,000 | $2,000,000 | ||||||
| % of Completion | 25.00% | 70.73% | 100.00% | ||||||
| Revenue to be recognised(cumulative) | $1,250,000.00 | $3,536,585.37 | $5,000,000.00 | ||||||
| Gross profit(cumulative) | $250,000.00 | $636,585.37 | $900,000.00 | ||||||
| Gross profit(year) | $250,000.00 | $386,585.37 | $263,414.63 | ||||||
| Journal Entries | 2016 | 2017 | 2018 | ||||||
| Construction in progress A/c Dr.(gross profit) | $250,000 | $386,585 | $263,415 | ||||||
| Construction expense A/c Dr. | $1,000,000 | $1,900,000 | $1,200,000 | ||||||
| To, Revenue from long term contract | $1,250,000 | $2,286,585 | $1,463,415 | ||||||
*If you have any query please let me know in the comment section. Please give thumps up if you are satisfied.
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