Question

Martinez Construction Company began work on a \$419,500 construction contract in 2020. During 2020, Martinez incurred...

Martinez Construction Company began work on a \$419,500 construction contract in 2020. During 2020, Martinez incurred costs of \$282,500, billed its customer for \$232,500, and collected \$181,000. At December 31, 2020, the estimated additional costs to complete the project total \$164,140.

Prepare Martinez’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method. (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. Round answers to 0 decimal places, e.g. 5,275.)

No.

Account Titles and Explanation

Debit

Credit

(a)

enter an account title to record the transaction using the percentage-of-completion method enter a debit amount enter a credit amount
enter an account title to record the transaction using the percentage-of-completion method enter a debit amount enter a credit amount
enter an account title to record the transaction using the percentage-of-completion method enter a debit amount enter a credit amount

(b)

enter an account title to record the transaction using the completed-contract method enter a debit amount enter a credit amount
enter an account title to record the transaction using the completed-contract method enter a debit amount enter a credit amount

 ANSWER Explanation : Total estimated cost = \$282,500 + \$\$164,140 = \$446,640 Loss =\$446,640 - 419,500 = \$27,140 Percentage of completed construction =\$282,500/\$446,640 = 63.25% Construction revenue = \$419,500 * 63.25% = \$265,334
 Date Account titles and Explanation Debit (\$) Credit (\$) (a) Construction expense \$     2,92,474 To, Construction in process \$        27,140 To, Construction revenue \$     2,65,334 (b) Loss from contract \$        27,140 To, Construction in process \$        27,140

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