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Constructlion LT Contract Example Questions

Constructlion LT Contract Example Questions - 1,000,000(c...

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7. Long-term construction accounting (20 points) Howard Construction Co. contracted to build a bridge for $3,000,000. Construction began in 2004 and was completed in 2005. Data relating to the construction are: 2004 2005 Costs incurred $990,000 $825,000 Estimated costs to complete 810,000 Howard uses the percentage-of-completion method. Instructions (a) How much revenue should be reported for 2004? Show your computation. $990,000 ————— = Percentage of completion of 55% × $3,000,000 = $1,650,000 construction revenue $1,800,000 (b) Make the entry to record progress billings of $1,000,000 during 2004. Debit Credit Accounts Receivable .................................. 1,000,000 Billings on Construction in Process .....................................................
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Unformatted text preview: 1,000,000 (c) Make the entry to record the revenue and gross profit for 2004. Construction Expenses ..................................... 990,000 Construction in Process ..................................... 660,000 Revenue from Long-Term Contracts . ................................................. 1,650,000 (d) How much gross profit should be reported for 2005? Show your computation. Revenue $3,000,000 Costs 1,815,000 Total gross profit 1,185,000 Recognized in 2004 (660,000 ) Recognized in 2005 $ 525,000 Or Total revenue $3,000,000 Recognized in 2004 (1,650,000 ) Recognized in 2005 1,350,000 Costs in 2005 (825,000 ) Gross profit in 2005 $ 525,000...
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