Final answer:
In the completed contract method, revenue and associated costs are recognized only when a contract is fully completed. The journal entry upon completion would debit Accounts Receivable and Construction Expenses for the total revenue and costs, respectively, and credit Construction Revenue and Accounts Payable or Accrued Expenses.
Step-by-step explanation:
The journal entry for recording bills in recognizing revenue upon contract completion using the completed contract method typically involves deferring revenue and costs until the end of the contract. Under this method, no revenue is recognized until the contract is completed. When the project is complete, the company will record the total revenue and the costs associated with the contract.
To illustrate, suppose a company completes a contract and the total revenue agreed upon is $100,000. The costs associated with the project were $60,000. The journal entry to record the completed contract would be:
Debit Construction Expense for $60,000
Credit Accrued Expenses or Accounts Payable for $60,000 (to recognize the costs incurred)
Debit Accounts Receivable for $100,000 (to recognize the earned revenue)
Credit Construction Revenue for $100,000 (to recognize the revenue upon completion)
By using the completed contract method, the company acknowledges the revenue and costs in its books only when the project is fully completed. This method can impact financial statements differently from the percentage-of-completion method, where revenue and expenses are recognized throughout the duration of the project.