Question

During 2020, Flint Company started a construction job with a contract price of $1,610,000. The job was completed in 2022. The following information is available.

		2020		2021		2022
Costs incurred to date		$393,900		$760,380		$1,059,000
Estimated costs to complete		616,100		341,620		–0–
Billings to date		299,000		905,000		1,610,000
Collections to date		268,000		818,000		1,421,000

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Gross profit recognized in 2020		$enter a dollar amount
Gross profit recognized in 2021		$enter a dollar amount
Gross profit recognized in 2022		$enter a dollar amount

List of Accounts

  

Prepare all necessary journal entries for 2021. (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. For costs incurred use account Materials, Cash, Payables.)

Account Titles and Explanation	Debit	Credit
enter an account title to record cost of construction	enter a debit amount	enter a credit amount
enter an account title to record cost of construction	enter a debit amount	enter a credit amount
(To record cost of construction.)
enter an account title to record progress billings	enter a debit amount	enter a credit amount
enter an account title to record progress billings	enter a debit amount	enter a credit amount
(To record progress 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.)

List of Accounts

  

Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.

		2020		2021		2022
Gross profit		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount

Answer 1

1. Complete the amount of gross profit to be recognised each year

	2020	2021	2020
Contract price	$1,610,000	$1,610,000	$1,610,000
Less: Estimated cost;
Cost in incurred to date	$393,900	$760,380	$1,059,000
Estimated cost to complete	$616,100	$341,620	-
Estimated total costs	$1,010,000	$1,102,000	$1,059,000
Estimated gross profit	$600,000	$508,000	$551,000
Percent complete	39%	69%	100%
Revenue recognised in prior years	-	$234,000	$116,520
Total revenue recognized	$234,000	$350,520	$551,000
Gross profit recognized	$234,000	$116,520	$200,480

2. Journal entries

General journal	Debit	Credit
To record cost of construction:
Construction in process ($760,380-$393,000)	$366,480
Materials,cash, payables etc		$366,480
To record process Billings:
Accounts receivable ($905,000-$299,000)	$606,000
Billings on construction in process		$606,000
To record Collections:
Cash ($818,000-$268,000)	$550,000
Accounts receivable		$550,000
To recognize revenue and gross profit:
Construction in process	$366,480
Construction expense	$116,520
Revenue from long-term construction		$483,000*

*($1,610,000×(69%-39%))

3. Gross profit to be recognized each year assuming completed-contract method is used

	2020	2021	2022
Gross profit recognized($1,610,000-$1,059,000)	$0	$0	$551,000

_____×_____

All the best