Sunland, Inc. began work on a $7,622,000 contract in 2017 to construct an office

Question

Sunland, Inc. began work on a $7,622,000 contract in 2017 to construct an office building. During 2017, Sunland, Inc. incurred costs of $1,681,750, billed its customers for $1,162,000, and collected $909,000. At December 31, 2017, the estimated additional costs to complete the project total $3,123,250. Prepare Sunland’s 2017 journal entries using the percentage-of-completion method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For costs incurred use account Materials, Cash, Payables. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Explanation / Answer

Solution: Following is the required journal entry:

Working notes:

Costs incurred to date. (a) = $1,681,750

Estimated cost to complete. (b) = $3,123,250

Total Estimated cost (a+b). = $4,805,000

Expected gross profit = Contract - Total Estimated cost = 7,622,000 - 4,805,000 = $2,817,000

Particulars Debit ($) Credit ($) Construction Expense 1,681,750 Construction in progress 2,817,000 Revenue from long-term contract 4,498,750

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