During 2017, Blossom Company started a construction job with a contract price of

Question

During 2017, Blossom Company started a construction job with a contract price of $1,536,000. The job was completed in 2019. The following information is available. The contract is non-cancellable.

2017 2018 2019

Costs incurred to date $384,000 $792,000 $1,027,200

Estimated costs to complete 576,000 264,000 0

Billings to date (non-refundable) 288,000 864,000 1,536,000

Collections to date 259,200 777,600 1,368,000

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

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.)

Calculate the amount of gross profit to be recognized each year, assuming the completed-contract method is used. (Do not leave any answer field blank. Enter 0 for amounts.)

$

Explanation / Answer

Percentage completion method 2017 2018 2019 Cost incurred in till previous year 0 384000 792000 ADD Cost incurred during the year 384000 408000 235200 Total cost incurred till date 384000 792000 1027200 ADD Estimated cost to be incurred 576000 264000 0 Total estimated cost to be incurred 960000 1056000 1027200 Percentage of completion (A) 40% 75.00% 100% (cost incurred till date /total estimated cost ) Total revenue (B) 1536000 1536000 1536000 Total revenue recognized (A *B) 614400 1152000 1536000 Less Revenue recognized in previous year 0 614400 1152000 revenue recognized in current year 614400 537600 384000 2017 2018 2019 Revenue 614400 537600 384000 Less Cost incurred 384000 408000 235200 Gross profit 230400 129600 148800 1 Construction in progress 408000                Accounts payable 408000 2 Contracts receivable 576000                Progress billings 576000 3 Cash 518400           Contract receivable 518400 4 Construction in progress 129600 Construction expense 408000                Construction revenue 537600 Completed contracts 2017 2018 2019 Revenue 0 0 1536000 Less Cost incurred 0 0 1027200 Gross profit 0 0 508800

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