Beavis Construc tion Company was the low bidder on a construction project to bui
ID: 2508519 • Letter: B
Question
Beavis Construc tion Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2012 and completed in 2013. Cost and other data are presented below 2012 013 Costs incurred during the year S 450,000 S1.100,000 1050,000 Estimated costs to complete Billings during the year Cash collections during the ear Assu 00,000 400.000 00,000 500,000 me that Beavis uses the percent age-of-completion method for revenue recognition. Required: I Compute the amount of gross profit recognized dring 2012 and 20 2. Pre 3. Prepare pare all journal entries related to the construction project in 2012 and 2013. Statement of Financial Position end of 2012 and 2013(f any).Explanation / Answer
Contract price18,00,000
Actual cost4,50,000
Estimated cost to complete10,50,000
Total estimated project cost15,00,000
Estimated total gross profit3,00,000
Percentage of completion (4,50,000/15,00,000) 30%
Gross profit recognized90,000
Gross profit recognized in 2013
Contract price18,00,000
Cost incurred2012: 4,50,000
2013: 11,00,000
Total cost15,50,000
Total gross profit2,50,000
Recognized in 2012:90,000
Recognized in 2013:1,60,000
Year
Particulars
Debit
Credit
2012
Construction in progress
4,50,000
Cash or Accounts payable
4,50,000
Accounts receivable
4,00,000
Billing on construction contract
4,00,000
Cash
3,00,000
Accounts receivable
3,00,000
Construction in progress
90,000
Cost of construction
4,50,000
Revenue from long-term contracts
5,40,000
2013
Construction in progress
11,00,000
Cash or Accounts payable
11,00,000
Accounts receivable
14,00,000
Billing on construction contract
14,00,000
Cash
15,00,000
Accounts receivable
15,00,000
Construction in progress
1,60,000
Cost of construction
11,00,000
Revenue from long-term contracts
12,60,000
Billing on construction contract
18,00,000
Construction in progress
18,00,000
Year
Particulars
Debit
Credit
2012
Construction in progress
4,50,000
Cash or Accounts payable
4,50,000
Accounts receivable
4,00,000
Billing on construction contract
4,00,000
Cash
3,00,000
Accounts receivable
3,00,000
Construction in progress
90,000
Cost of construction
4,50,000
Revenue from long-term contracts
5,40,000
2013
Construction in progress
11,00,000
Cash or Accounts payable
11,00,000
Accounts receivable
14,00,000
Billing on construction contract
14,00,000
Cash
15,00,000
Accounts receivable
15,00,000
Construction in progress
1,60,000
Cost of construction
11,00,000
Revenue from long-term contracts
12,60,000
Billing on construction contract
18,00,000
Construction in progress
18,00,000
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