Exercise 18-15 In 2014, Gurney Construction Company agreed to construct an apart
ID: 2462478 • Letter: E
Question
Exercise 18-15
In 2014, Gurney Construction Company agreed to construct an apartment building at a price of $1,669,000. The information relating to the costs and billings for this contract is shown below.
(a) Assuming that the percentage-of-completion method is used.
(1) compute the amount of gross profit to be recognized in 2014 and 2015.
Gross profit to be recognized in 2015 $249,660
(2) prepare journal entries for 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For costs incurred use account Materials, Cash, Payables.)
(b) For 2015, show how the details related to this construction contract would be disclosed on the balance sheet and on the income statement.
Partial Income Statement (2015)
Partial Balance Sheet (12/31/15)
.
Explanation / Answer
Gross profit recognized in 2014: Contract price 16,69,000 Costs: Costs to date 3,94,680 Estimated additional costs 6,17,320 10,12,000 Total estimated profit 6,57,000 Percentage completion to date (394680/1012000) 39.00% Gross profit recognized in 2014: 256230 Gross profit recognized in 2015: Contract price 16,69,000 Costs: Costs to date 779240 Estimated additional costs 2,32,760 10,12,000 Total estimated profit 6,57,000 Percentage completion to date ($779240/$1012000) 77% Total Gross profit recognized 5,05,890 Less: Gross profit recognized in 2014 2,56,230 Gross profit recognized in 2015: 2,49,660 Description/Account Debit Credit Construction in Process ($779240 - $394680) 3,84,560 Materials, Cash, Payables, etc. 3,84,560 Accounts Receivable ($851800 - $318400) 5,33,400 Billings on Construction in Process 5,33,400 Cash ($766700 - $249300) 5,17,400 Accounts Receivable 5,17,400 Construction Expense 3,84,560 Construction in Process 2,49,660 Revenues from Long-Term Contract 634220 Balance Sheet Current assets Receivables- construction in process 851800-766700 85100 Inventories-construction in process totaling 9,19,200 Total cost to date 779240 Gross Profit 2014. 6,57,000 Gross Profit 2015 2,49,660 16,85,900 Less Billing 7,66,700 Inventories-construction in process totaling 9,19,200
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