Exercise 18-33 2017 2018 2019 Prepare all necessary journal entries for 2018. (C

Question

Exercise 18-33

2017

2018

2019

Prepare all necessary journal entries for 2018. (Credit account titles are automatically indented when 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. For costs incurred use account Materials, Cash, Payables.)

Account Titles and Explanation

Debit

Credit

(To record cost of of construction.)

(To record progress billings.)

(To record collections.)

(To recognize revenue.)

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Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.
a. Gross Profit 2017:

b. Gross Profit 2018:

c. Gross Profit 2019:

Exercise 18-33

During 2017, Bridgeport Company started a construction job with a contract price of $1,600,000. The job was completed in 2019. The following information is available.

2017

2018

2019

Costs incurred to date $405,900 $830,680 $1,074,000 Estimated costs to complete 584,100 262,320 –0– Billings to date 302,000 898,000 1,600,000 Collections to date 272,000 818,000 1,420,000

Explanation / Answer

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

Formula = Contract Value*Costs Incurred to Date/(Costs Incurred to Date + Estimated Costs to Complete) - Costs Incurred to Date = 1,600,000*405,900/(405,900+584,100) – 405,900

= $250,100. This is the gross profit recognized in 2017.

gross profit recognized in 2018 = [Contract Value*Costs Incurred to Date/(Costs Incurred to Date + Estimated Costs to Complete) - Costs Incurred to Date ] - Gross Profit Recognized in 2017 = [1,600,000*830,680/(830,680+262,320)-830,680]-250,100

= 135,220. This is the gross profit recognized in 2018.

gross profit recognized in 2019 = Contract Value - Costs Incurred to Date - Gross Profit Recognized in 2017 - Gross Profit Recognized in 2018 = 1,600,000 – 1,074,000 – 250,100-135,220

= $140,680. This is the gross profit recognized in 2019.

2. Journal entries:

3. a. Gross profit in 2017 = 0

b. gross profit in 2018 = 0

c. Gross profit in 2019 = 1,600,000 - 1,074,000 = $526,000

Account Titles and Explanation Debit Credit Construction in Process (830,680 - 405,900) $424,780 Materials, Cash, Payables, etc. $424,780 (To record cost of construction) Accounts Receivable (898,000 - 302,000) $596,000 Billings on Construction $596,000 (To record progress billings) Cash (818,000 - 272,000) $546,000 Accounts Receivable $546,000 (To record collections) Construction Expense $424,780 Construction in Process $135,220 Revenue from Long-Term Contract $560,000 (To recognize revenue)

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