Question

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 1

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