1. The amount of Revenue and Gross Profit (Loss) to be recognized:
2021 2022 2023
Revenue recognized $2,900,000 $4,500,000 $2,600,000
Cost incurred $2,291,000 $3,555,000 $2,259,400
Gross profit (loss) $609,000 $945,000 $340,600
2-a. Journal Entries for 2021:
Debit Construction Costs $2,291,000
Credit Various accounts $2,291,000
To record the construction costs for the year.
Debit Accounts Receivable $1,900,000
Credit Unearned Revenue $1,900,000
To record unearned revenue from billings to customer.
Debit Cash $1,700,000
Credit Accounts Receivable $1,700,000
To record cash received from customer.
Debit Unearned Revenue $2,900,000
Credit Construction Revenue $2,900,000
To record revenue recognized for the year.
2-b. Journal Entries for 2022:
Debit Construction Costs $3,555,000
Credit Various accounts $3,555,000
To record the construction costs for the year.
Debit Accounts Receivable $3,946,000
Credit Unearned Revenue $3,946,000
To record unearned revenue from billings to customer.
Debit Cash $3,500,000
Credit Accounts Receivable $3,500,000
To record cash received from customer.
Debit Unearned Revenue $4,500,000
Credit Construction Revenue $4,500,000
To record revenue recognized for the year.
2-c. Journal Entries for 2023:
Debit Construction Costs $2,259,400
Credit Various accounts $2,259,400
To record the construction costs for the year.
Debit Accounts Receivable $4,154,000
Credit Unearned Revenue $4,154,000
To record unearned revenue from billings to customer.
Debit Cash $4,800,000
Credit Accounts Receivable $4,800,000
To record cash received from customer.
Debit Unearned Revenue $2,600,000
Credit Construction Revenue $2,600,000
To record revenue recognized for the year.
3. Partial Balance Sheet for the years ended 2021 and 2022
2021 2022
Current Assets:
Accounts Receivable $200,000 $646,000
Current Liabilities:
Unearned Revenue ($1,000,000) ($1,554,000)
Equity:
Gross profit $609,000 $945,000
4. The amount of Revenue and Gross Profit (Loss) to be recognized:
2021 2022 2023
Revenue recognized $3,100,000 $4,000,000 $2,900,000
Cost incurred $2,510,000 $3,855,000 $3,210,000
Gross profit (loss) $590,000 $145,000 ($310,000)
5. The amount of Revenue and Gross Profit (Loss) to be recognized:
2021 2022 2023
Revenue recognized $3,100,000 $3,600,000 $3,300,000
Cost incurred $2,510,000 $3,855,000 $4,065,000
Gross profit (loss) $590,000 ($255,000) ($765,000)
Data and Calculations:
Revenue from Contract = $10,000,000
2021 2022 2023
Cost incurred $ 2,291,000 $ 3,555,000 $ 2,259,400
Estimated costs to complete 5,609,000 2,054,000 0
Total costs (incurred and
estimated) $7,900,000 $7,900,000 $8,105,400
Billings 1,900,000 3,946,000 4,154,000
Cash collections 1,700,000 3,500,000 4,800,000
Percentage of completion for 2021 = 29% ($2,291,000/$7,900,000 x 100)
Percentage of completion for 2022 = 45% ($3,555,000/$7,900,000 x 100)
Percentage of completion for 2023 = 26% (100 - 29% - 45%)
The amount of Revenue and Gross Profit (Loss) to be recognized based on percentage of completion:
2021 2022 2023
Revenue recognized $2,900,000 $4,500,000 $2,600,000
= ($10,000,000 x 29%) ($10,000,000 x 45%) ($10,000,000 x 26%)
Cost incurred $2,291,000 $3,555,000 $2,259,400
Gross profit (loss) $609,000 $945,000 $340,600
2021 2022 2023
Cost incurred $ 2,510,000 $ 3,855,000 $ 3,210,000
Estimated costs to complete 5,710,000 3,210,000 0
Total costs (incurred and
estimated) $8,220,000 $9,575,000 $9,575,000
Percentage of completion 31% 40% 29%
Revenue recognized $3,100,000 $4,000,000 $2,900,000
Cost incurred $2,510,000 $3,855,000 $3,210,000
Gross profit (loss) $590,000 $145,000 ($310,000)
2021 2022 2023
Cost incurred $ 2,510,000 $ 3,855,000 $ 4,065,000
Estimated costs to complete 5,710,000 4,210,000 0
Total costs (incurred and
estimated) $8,220,000 $10,575,000 $14,640,000
Percentage of completion 31% 36% 33%
Revenue recognized $3,100,000 $3,600,000 $3,300,000
Cost incurred $2,510,000 $3,855,000 $4,065,000
Gross profit (loss) $590,000 ($255,000) ($765,000)