Question

During 2020, Pearl Company started a construction job with a contract price of $1,590,000. The job was completed in 2022. The following information is available. 2020 2021 2022 Costs incurred to date $396,000 $806,600 $1,080,000 Estimated costs to complete 594,000 283,400 –0– Billings to date 301,000 892,000 1,590,000 Collections to date 268,000 816,000 1,427,000

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

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.)

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

Ques 1	2020	2021	2022
Contract price(a)	$ 1,590,000	$ 1,590,000	$ 1,590,000
Less:estimated cost:
cost to date(b)	$    396,000	$    806,600	$ 1,080,000
Estimated cost to complete	$    594,000	$    283,400	$                -
Estimated total costs('c)	$    990,000	$ 1,090,000	$ 1,080,000
Estimated % completion(b/c)	40.00%	74.00%	100.00%
Etimated gross profit(a-c)	$    600,000	$    500,000	$    510,000
Revenue recognised	$    240,000	$    370,000	$    510,000
Revenue recognised in prior year		$    240,000	$    370,000
Gross profit recognised	$    240,000	$    130,000	$    140,000

Ques 2

Accounts	debit	credit
Construction in proces	$ 410,600
Cash		$ 410,600
806600-396000
Accounts receivable	$ 591,000
billings on construction in process		$ 591,000
892000-301000
Cash	$ 548,000
Accounts receivable		$ 548,000
construction in proces	$ 410,600
construction expenses	$ 130,000
revenue from long term contracts		$ 540,600

Ques 3

Completed contract method
	2020	2021	2022
Gross profit	0	0	$    510,000