Homework Answers
1. Journal entries:
| Journal Entries when revenue is recognise over time. | |||
| Year | General Journal | Debit | Credit |
| 20X1 | Construction in Progress | 290000 | |
| Cash Payable, material, payable etc. | 290000 | ||
| 20X1 | Accounts Receivables | 260000 | |
| Billings on contract | 260000 | ||
| 20X1 | Cash | 240000 | |
| Accounts Receivables | 240000 | ||
| 20X1 | Construction in Progress | 60000 | |
| Constructin Expense | 290000 | ||
| Construction revenue | 350000 | ||
| 20X2 | Construction in Progress | 150000 | |
| Cash Payable, material, payable etc. | 150000 | ||
| 20X2 | Accounts Receivables | 265000 | |
| Billings on contract | 265000 | ||
| 20X2 | Cash | 285000 | |
| Accounts Receivables | 285000 | ||
| 20X2 | Construction in Progress | 25000 | |
| Constructin Expense | 150000 | ||
| Construction revenue | 175000 | ||
| 20X2 | Billings on contract | 525000 | |
| Construction in progress | 525000 |
2. Journal entries:
| Journal Entries when revenue is recognise at a point in time | |||
| Year | General Journal | Debit | Credit |
| 20X1 | Construction in Progress | 290000 | |
| Cash Payable, material, payable etc. | 290000 | ||
| 20X1 | Accounts Receivables | 260000 | |
| Billings on contract | 260000 | ||
| 20X1 | Cash | 240000 | |
| Accounts Receivables | 240000 | ||
| 20X1 | -No Entry- | ||
| Since the project is incomplete | |||
| No revenue is to be recognised | |||
| 20X2 | Construction in Progress | 150000 | |
| Cash Payable, material, payable etc. | 150000 | ||
| 20X2 | Accounts Receivables | 265000 | |
| Billings on contract | 265000 | ||
| 20X2 | Cash | 285000 | |
| Accounts Receivables | 285000 | ||
| 20X2 | Billings on contract | 525000 | |
| Constructin Expense | 440000 | ||
| Construction revenue | 525000 | ||
| Construction in progress | 440000 |
Working Data:
| 20X1 | 20X2 | |
| Contract Price (a) | 525000 | 525000 |
| Less: Estimated Cost | ||
| Costs incurred to date | 290000 | 150000 |
| Estimated costs to complete | 145000 | 0 |
| Estimated total costs (b) | 435000 | 150000 |
| Estimated gross profit (a-b) | 90000 | 375000 |
| % of completion | 66.67% | 100.00% |
| (Cost incurred till date / Total costs) | ||
| Gross profit earned | 60000 | 375000 |
| Less: Gross profit earned in previous year | 0 | 60000 |
| Gross profit recognised | 60000 | 315000 |
| Construction Revenue | 350000 | 525000 |
| Construction Revenue to be recognised over time | 350000 | 175000 |
| Construction Revenue to be recognised at a point in time | 0 | 525000 |
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