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Swifty Construction Company began work on a $416,400 construction contract in 2017. During 2017, Swifty incurred...

Swifty Construction Company began work on a $416,400 construction contract in 2017. During 2017, Swifty incurred costs of $277,100, billed its customer for $215,200, and collected $173,900. At December 31, 2017, the estimated additional costs to complete the project total $161,000.

Prepare Swifty’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

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Expert Solution

In the question details regarding only one year is provided, so the following enries for Decmber 2017 only

Contract Cost : 416,400

Cost Incured : 277,100

Billed to customer : 215,200

Amount collected : 173,900

Additional cost to completed the project : 161,000

Percentage of completed method:

In this method revenue to be recognised based on the percentage completed during the year.

Revenue Recognised = Contract cost * Percentage of Completion

Percentage of completion = Cost Incured / (Cost incured + expected cost to be incured in future)

= 277100/ (277100+161000)

= 63.25%

Revenue to be recognised = 416400 * 63.25%

= 263375 (Rounded off)

Profit/(Loss) = Contract Revenue - contract cost

= 263,375 - 277100

= (13,725)

Entries:

Construction in process/Work in Progress 277100
Bank 277100
Advance Receivable 215200
Billing on construction contract 215200
Bank 173900
Advance Recevable 173900
Construction Expenses 277100
Construction Revenue 263374.66
Construction inprocess 13725.34

For recognising profit there is no seperate entry , last entry automatically lead to profit.

Completed contract method:

Entries:

Construction in process/Work in Progress 277100
Bank 277100
Advance Receivable 215200
Billing on construction contract 215200
Bank 173900
Advance Recevable 173900
In completed contract method the contract revenue will recognise in the year of completion of the contract.

ekkarill92 answered 10 months ago
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