Question

Edwards Company contracted on 4/1/17 to construct a building for $4,800,000. The project was completed in 2019. Additional data follow: 2017 2018 2019 Costs incurred to date $1,120,000 $2,700,000 $3,800,000 Estimated cost to complete 2,080,000 900,000 — Billings to date 1,000,000 3,800,000 4,800,000 Collections to date 800,000 2,600,000 4,400,000 Instructions (a) Calculate the income recognized by Edwards under the percentage-of-completion method of accounting in each of the years 2017, 2018, and 2019. (b) Prepare all necessary entries for the year 2018. (c) Present the balance sheet disclosures at December 31, 2018. Proper headings or subheadings must be indicated.

Answer 1

A)

Particulars	Calculation	Amount($)
Gross Profit Recognized in 2017	$4800000*($1120000/($1120000+$2080000)) - $1120000	560000
Gross Profit Recognized in 2018	($4800000*($2700000/($2700000+$900000)) - $2700000) - $560000	340000
Gross Profit Recognized in 2019	$4800000 - $3800000 - $560000 - $340000	100000

B) Journal Entries :-

S No.	Particulars	Debit($)	Credit($)
1)	Construction in Process A/c Dr.	1580000
	To Accounts Payables A/c ($2700000-$1120000)		1580000
	(To record cost of contruction)
2)	Contract Receivable A/c Dr.($3800000-$1000000)	2800000
	To Progressive Billing A/c		2800000
3)	Cash A/c Dr. ($2600000 - $800000)	1800000
	To Contract Receivable A/c		1800000
4)	Contruction Expense A/c Dr.	1580000
	Contruction in Process A/c Dr.	340000
	To Revenue from Contract A/c		1920000