During 2017, Wildhorse Company started a construction job with a contract price

Question

During 2017, Wildhorse Company started a construction job with a contract price of $1,888,000. The job was completed in 2019. The following information is available. The contract is non-cancellable.

1. Calculate the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Gross profit recognized

2. Prepare all necessary journal entries for 2018. (Use Accounts Payable for costs incurred to date.) (Credit account titles are automatically indented when the 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.)

Account Titles and Explanation

Debit

Credit

(To record cost incurred.)

(To record billings to date.)

(To record collection.)

(To record revenue from long-term contract.)

(To record construction expenses.)

2017 2018 2019 Costs incurred to date $472,000 $973,500 $1,262,600 Estimated costs to complete 708,000 324,500 0 Billings to date (non-refundable) 354,000 1,062,000 1,888,000 Collections to date 318,600 955,800 1,681,500

Explanation / Answer

708000

1) 2017 2018 2019 Contract price 1888000 1888000 1888000 Costs: Costs to date 472000 973500 1262600 Estimated costs to complete 708000 324500 0 Total costs 1180000 1298000 1262600 Percentage completed to date 40% 75% 100% Total estimated profit 708000 590000 625400 Total gross profit recognized 283200 442500 625400 Less: Gross profit recognized in previous years 0 283200 442500 Gross profit recognized in current year 283200 159300 182900 2) Account Titles and Explanation Debit Credit Construction in Process (973500-472000) 501500 Materials, Cash, Payables etc. 501500 (To record cost incurred.) Accounts receivable (1062000-354000) 708000 Billings and construction in process

708000

(To record billings to date.) Cash 637200 Accounts receivable (955800-318600) 637200 (To record collection.) Construction in process 159300 Construction expenses 501500 Revenue from long term contract (1880000*35%) 660800 (To record revenue from long-term contract.)

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