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Chapter 18: Question BE18-22 (page 1034)

Turner, Inc. began work on a \(7,000,000 contract in 2017 to construct an office building. During 2017, Turner, Inc. incurred costs of \)1,700,000, billed its customers for \(1,200,000, and collected \)960,000. At December 31, 2017, the estimated additional costs to complete the project total $3,300,000. Prepare Turner’s 2017 journal entries using the percentage-of-completion method.

Short Answer

Expert verified

Revenue generated from this contract is $2,380,000.

Step by step solution

01

Meaning of Percentage-of-Completion Method

As a corporation approaches the end of a long-term contract, the percentage-of-completion technique is used to calculate revenues, expenditures, and gross profit. Deferring recognition of these items until the contract's end distorts the effort (costs) and outcomes of the accounting periods (revenues).

02

Journal entries of Turner Inc. in 2017

Date

Particular

Debit ($)

Credit ($)

Construction in process a/c

1,700,000

To Materials, Cash, Payables a/c

1,700,000

Accounts receivables a/c

1,200,000

To Billings on construction in process a/c

1,200,000

Cash a/c

960,000

To Accounts receivables a/c

960,000

Construction in process a/c

680,000

Construction expenses a/c

1,700,000

To Revenue from contract a/c

2,380,000

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Most popular questions from this chapter

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Instructions

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