Question

McCombs Contractors received a contract to construct a mental health facility for $2,500. Construction was begun in 2017 and completed in 2018. Cost and other data are presented below:

                                                                        2017                2018

Costs incurred during the year                         $1,500	$1,300
Estimated costs to complete                              1,200	0
Billings during the year                                    1,200	1,300
Cash collections during the year                        1,000	1,500

1. Compute the amount of revenue and gross profit recognized during 2017 and 2018.

2. Assume that McCombs recognizes revenue on this contract over time according to percentage of completion. Prepare all journal entries for 2017 and 2018 to record costs, billings, collections, profit (loss) recognition, and transferring of the asset when construction is complete. Round your answers to the nearest whole dollar.

3. Assume that McCombs recognizes revenue upon project completion according to the percentage of completion. Prepare all journal entries for 2017 and 2018 to record costs, billings, collections, and profit (loss) recognition, and transferring of the asset when construction is complete. Round your answers to the nearest whole dollar.

Answer 1

Journal for the cost incurred during the years

2017    Dr Cr

Construction Work in Progress $1,500

Mental Health Facility $1500

2018 Dr Cr

Construction Work in Progress $1,300

Mental Health Facility $1300

Journal Entry for Billing

2017    Dr Cr

Construction Receivable     $1,200

Construction work in Progress $1200

2018 Dr Cr

Construction Receivable     $1,300

Construction work in Progress $1300

Journal entry for Cash collection

2017    Dr Cr

Cash $1,000

  Construction Receivable    $1000

2017    Dr Cr

Cash $1,500

  Construction Receivable    $1500

Kindly note that there is no journal entry required for budget