Question

Turner, Inc. began work on a $7,000,000contract in 2010 to construct an office builidng. During 2010,Turner, Inc. incurred costs of $1,700,000, billed thier customersfor $1,200,000, and collected $960,000. At December 31, 2010, theestimated future costs to complete the project total $3,300,000.Prepare Turner's 2010 journal entries using thepercentage-of-completion method.

Construction inProcess........................................................................1,700,000
Materials,Cash, Payables, etc....................................................1,700,000
Accounts Receivable............................................................................1,200,000
Billingson Construction in Process........................................... 1,200,000
Cash.......................................................................................960,000
AccountsReceivable..................................................................960,000
Construction inProcess........................................................................680,000
[($1,700,000 ÷ 5,000,000) X$2,000,000]
Construction Expenses.........................................................................1,700,000
Revenuefrom Long-Term Contracts..........................................2,380,000
($7,000,000,000X 34%)
I just don't understand this part. Where didthe 5,000,000 and the 2,000,000 and the 34% come from?

Answer 1

Hey there!

For what I understood, you just need to clear some points of the problem and then you can continue by your own so I gonna help you with that. Good luck!

Step-by-step explanation:

1.

a= $1,700,000 Incurred costs

b= $3,300,000 Estimated costs to complete the project

a+b= $5,000,000 Total cost of the project

2.

$1,700,000/$5,000,000 = 34% is the degree of progress of the project

3.

a-$7,000,000 Amount of contract

b-$5,000,000 Total cost of project

a-b=$2,000,000 Project profit