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Application of Percentage-of-Completion Method, Cost-to-Cost Basis

This document provides financial information about a construction project over 3 years using the percentage-of-completion method. It includes costs, billings, collections and calculations of revenue and gross profit recognized each year as completion progresses from 40% in 2012 to 85% in 2013 and 100% in 2014.

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145 views4 pages

Application of Percentage-of-Completion Method, Cost-to-Cost Basis

This document provides financial information about a construction project over 3 years using the percentage-of-completion method. It includes costs, billings, collections and calculations of revenue and gross profit recognized each year as completion progresses from 40% in 2012 to 85% in 2013 and 100% in 2014.

Uploaded by

anwar.maulana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Application of Percentage-of-Completion Method, Cost-to-Cost Basis

2012 2013 2014


Costs to date $400,000 $935,000 $1,070,000
Estimated costs to complete $600,000 $165,000 $0
Progress billings during the year $300,000 $900,000 $1,500,000
Cash collected during the year $270,000 $810,000 $1,425,000

2012 2013 2014


Contract price $1,500,000 $1,500,000 $1,500,000
Less estimated cost:
Costs to date $400,000 $935,000 $1,070,000
Estimated costs to complete $600,000 $165,000 $0
Estimated total costs $1,000,000 $1,100,000 $1,070,000
Estimated total gross profit $500,000 $400,000 $430,000
Percent complete 40% 85% 100%

Percentage-of-Completion Revenue, Costs, and Gross Profit by Year

To Date Recognized in Recognized in


Prior Years Current Year
2012
Revenues $600,000 $600,000
Costs $400,000 $400,000
Gross profit $200,000 $200,000
2013
Revenues $1,275,000 $600,000 $675,000
Costs $935,000 $400,000 $535,000
Gross profit $340,000 $200,000 $140,000
2014
Revenues $1,500,000 $1,275,000 $225,000
Costs $1,070,000 $935,000 $135,000
Gross profit $430,000 $340,000 $90,000

Journal Entries

2012 2013
To record costs of construction:
Construction in Process $400,000 $535,000
Materials, Cash, Payables, etc. $400,000
To record progress billings:
Accounts Receivable $300,000 $900,000
Billings on Construction in Process $300,000
To record collections:
Cash $270,000 $810,000
Accounts Receivable $270,000

Entries to recognize revenue and gross profit


To recognize revenue and gross profit:
Construction in Process (gross profit)
Construction Expenses
Revenue from Long-Term Contracts
To record completion of the contract:
Billings on Construction in Process
Construction in Process
2013 2014

$135,000
$535,000 $135,000

$1,500,000
$900,000 $1,500,000

$1,425,000
$810,000 $1,425,000

d gross profit

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