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ABC Corporation

- DR Construction in Progress - $425,000 CR Various Accounts - $425,000 (to record costs incurred in 2018) - DR Accounts Receivable - $900,000 CR Billings - $900,000 (to record billings in 2018) - DR Cash - $810,000 CR Accounts Receivable - $810,000 (to record cash collections in 2018) - DR Construction Expense - $135,000 DR Construction in Progress - $135,000 CR Revenue - $560,000 (to record revenue and gross profit using POC method)

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Demeke Hesebo
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149 views6 pages

ABC Corporation

- DR Construction in Progress - $425,000 CR Various Accounts - $425,000 (to record costs incurred in 2018) - DR Accounts Receivable - $900,000 CR Billings - $900,000 (to record billings in 2018) - DR Cash - $810,000 CR Accounts Receivable - $810,000 (to record cash collections in 2018) - DR Construction Expense - $135,000 DR Construction in Progress - $135,000 CR Revenue - $560,000 (to record revenue and gross profit using POC method)

Uploaded by

Demeke Hesebo
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 DOCX, PDF, TXT or read online on Scribd
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ABC Corporation

Trial Balance (corrected)


OCT30, 2014

Debit Credit
Cash .......................................................................... $ 28,700
Accounts Receivable ............................................... 33,700
inventory .................................................................. 45,000
supplies .................................................................... 5,500
Equipment………………………………………… 133,000

Accounts Payable .................................................... $ 48,500


Common Stock ........................................................ 90,000
Retained Earnings ................................................... 8,000
Service Revenue ...................................................... 757,200
5. During 2012 ,x construction company started construction 1ob in price of 1,600,000. The job
completed 2014. The following information is available
During 2017, Nilsen Company started a construction job with a contract price of $1,600,000. The
job was completed in 2019. The following information is available. The contract is non-
cancellable.
2017 2018 2019
Costs incurred tod ate 400,000 825,000 1,070,000
Estimated costs to complete 600,000 275,000 0
Billing to date 300,000 900,000 1,600,000
Collectionsto date 270,000 810,000 1,425,000

Instructions:
(a)Calculate the amount of gross profit to be recognized each year, assuming the percentage-of-
completion method used.
(b)Prepare all necessary journal entries for 2018

(a) Percentage of completion method


Cost remaining = 400,000 + 600,000 = 1,000,000
2017= 400,000 / (400,000 + 600,000) 40%
2018= 825,000 / (825,000 + 275,000) 75%
2019 100% (hasto be)

2017:
Revenue 40% x 1,600,0000 = $640,000
Cost = 400,000
Gross Profit (2017) = 240,000
2018:
Revenue 75% x 1,600,000 – 640,000 = $560,000
Cost = 825,000 – 400,000 = 425,000
Gross Profit = 135,000
2019:
Revenue 100% * 1,600,000 – 640,000 – 560,000 = 400,000
Cost = 1,070,000 – 825,000 = 245,000
Gross Profit = 155,000
(b) 2017
DR CIP – 400,000
CR Various Accounts – 400,000
DR A/R – 300,000
CR Billings – 300,000
DR Cash – 270,000
CR A/R – 270,000
DR CIP – 240,000
DR Construction Expenses – 400,000
CR Revenue – 640,000

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