Question

Jackson Corp. recognizes revenue over time to account for long-term construction contracts. In year 3, Jackson anticipates a loss on the contract for $50,000. In year 3, Jackson recognizes revenues of $800,000 and has $850,000 in construction costs. Indicate which of the following are included in the journal entry at year-end to recognize revenues and profit/loss on the contract.

Answer 1

Jackson Corp.'s journal entry to recognize revenue and loss includes a debit of $850,000 for construction expenses, a credit of $800,000 for revenue, and adjustments for the anticipated loss on the contract of $50,000, resulting in a net loss position.

Step-by-step explanation:

Jackson Corp. has recognized revenue of $800,000 and incurred costs of $850,000, resulting in a loss before considering the anticipated loss. The anticipated loss on the contract is $50,000. To record this in their accounting journal, Jackson Corp. would make the following entries:

• Debit: Construction Expense for $850,000
• Credit: Revenue for $800,000
• Debit: Anticipated Loss on Contract for $50,000
• Credit: Profit/Loss on Contract (which would be a loss in this case) for $50,000

These journal entries would reflect the actual cost incurred and the loss expected from the contract, aligning the financial records with the recognized revenue and anticipated future loss.