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Revenue Recognition Exercise

ABC Construction Company was contracted to build a building for $975,000 over a two year period from July 2015 to September 2017. Under the percentage of completion method, ABC would record construction costs and billings/collections each year. In 2015, ABC incurred $180,000 in costs, estimated remaining costs of $630,000, billed $153,000 and collected $140,000. In 2016, costs were $450,000 with estimated remaining costs of $190,000, billings were $382,500 and collections were $380,000. In 2017, final costs were $195,000 and the remaining balance was billed and collected per the contract.

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205 views6 pages

Revenue Recognition Exercise

ABC Construction Company was contracted to build a building for $975,000 over a two year period from July 2015 to September 2017. Under the percentage of completion method, ABC would record construction costs and billings/collections each year. In 2015, ABC incurred $180,000 in costs, estimated remaining costs of $630,000, billed $153,000 and collected $140,000. In 2016, costs were $450,000 with estimated remaining costs of $190,000, billings were $382,500 and collections were $380,000. In 2017, final costs were $195,000 and the remaining balance was billed and collected per the contract.

Uploaded by

Shyam S
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Intermediate Accounting 1

Chapter 6: Revenue Recognition

Question Sheet

1. ABC Construction Company was contracted to construct a building for $975,000. The building is
owned by a customer throughout the contract period. The contract provides for progress
st
31
payments. ABC’s accounting year end is December Work began under the contract on July
st
1 th
30
2015 and was completed in September 2017. Information regarding construction
activities is provided below

2015: Construction costs incurred during the year; $180,000, estimated costs to complete,
$630,000, progress billings during the year, $153,000, and collections of $140,000

2016: Construction costs incurred during the year; $450,000, estimated costs to complete,
$190,000, progress in billings during the year, $382,500 and collections of $380,000

2017: Construction costs incurred during the year; $195,000, because the contract was
completed, the remaining balance was billed later and collecting in full per the contract

Required:

Provide journal entries that will be recorded by ABC Construction. Assume percentage of
completion method has been used.

Prepared by: Charanjit Sirigh


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