In 2017, Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2019. The following information is available.
2017
2018
2019
Costs incurred to date
$400,000
$825,000
$1,070,000
Estimated costs to complete
600,000
275,000
-0-
Billings to date
300,000
900,000
1,600,000
Collections to date
270,000
810,000
1,425,000
Required:
1. Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. Gross profit recognized in 2017. Gross profit recognized in 2018. Gross profit recognized in 2019.
2. Prepare all necessary journal entries for 2018.
3. Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.
In 2017, Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2019. The following information is available.
| 2017 | 2018 | 2019 | |
| Costs incurred to date | $400,000 | $825,000 | $1,070,000 |
| Estimated costs to complete | 600,000 | 275,000 | -0- |
| Billings to date | 300,000 | 900,000 | 1,600,000 |
| Collections to date | 270,000 | 810,000 | 1,425,000 |
Required:
1. Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. Gross profit recognized in 2017. Gross profit recognized in 2018. Gross profit recognized in 2019.
2. Prepare all necessary journal entries for 2018.
3. Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.
Related questions
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,400,000 | $ | 3,600,000 | $ | 2,200,000 | |||
| Estimated costs to complete as of year-end | 5,600,000 | 2,000,000 | 0 | ||||||
| Billings during the year | 2,000,000 | 4,000,000 | 4,000,000 | ||||||
| Cash collections during the year | 1,800,000 | 3,600,000 | 4,600,000 | ||||||
Westgate recognizes revenue over time according to percentage of completion.
Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,400,000 | $ | 3,800,000 | $ | 3,200,000 | |||
| Estimated costs to complete as of year-end | 5,600,000 | 3,100,000 | 0 | ||||||
5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,400,000 | $ | 3,800,000 | $ | 3,900,000 | |||
| Estimated costs to complete as of year-end | 5,600,000 | 4,100,000 | 0 | ||||||
