Electric Boat, Inc., of New London, Connecticut, began operation on the construc
ID: 2469248 • Letter: E
Question
Electric Boat, Inc., of New London, Connecticut, began operation on the construction of a new deep sea discovery submarine for the US Navy. On January 2, 2016, and entered into a contract. This project was signed for the contract price was $6,000,000 and provided for penalties of $100,000 per week for late completion. Although during 2016 the project had been on schedule for timely completion, it was completed four weeks late on August 31, 2017.
The following data pertains to the separate long-term construction projects in progress:
As of December 31, 2016:
Costs incurred to date $2,400,000
Estimated costs to complete 600,000
Billings on 12/31/16 3,150,000
Cash collection on 12/31/16 2,550,000
As of August 31, 2017:
Costs incurred to date 3,000,000
Estimated costs to complete 0
Billing on 8/31/17 2,450,000
Cash collection 8/31/17 3,050,000
Additional information >> Electric Boat accounts for its long-term construction contracts using the percentage-of- completion method.
Using the information about the Electric Boat, prepare the following general journal entries without explanation:
> 12/31/16: Costs incurred for the year
> 12/31/16: Progressive Billings & Collections for the year
> 12/31/16: Revenue Recognition for the year
> 12/31/17: Costs incurred for the year
> 12/31/17: Progressive Billings & Collections for the year
> 12/31/17: Revenue Recognition for the year
> 12/31/17: Closing for the Long Term Contract accounts
Explanation / Answer
Contract Value 6000000 cost incurred in 2016 2400000 Estimated cost to complete 600000 % completed in 2016 cost incurred/total estimated completion cost 2400000/(2400000+600000) 80% 2016 journal entry Debit Credit construction in process 2400000 accounts payable or cash 2400000 contracts receivable 3150000 progress billing 3150000 cash 2550000 contracts receivable 2550000 construction in process 2400000 Profit (6000000-3000000)*80% construction expenses 2400000 construction revenues 4800000 2017 journal entry construction in process 600000 accounts payable or cash 600000 contracts receivable 2450000 progress billing 2450000 cash 3050000 contracts receivable 3050000 construction in process 200000 Profit (5600000-3000000)*100% less 2400000 recognised previously construction expenses 600000 construction revenues 800000 progress billing 5600000 construction in process 5600000
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