Hamilton Construction Company uses the percentage-of-completion method of accoun
ID: 2420535 • Letter: H
Question
Hamilton Construction Company uses the percentage-of-completion method of accounting. In 2014, Hamilton began work under contract #E2-D2, which provided for a contract price of $2,398,000. Other details follow:
2014
2015
(a) What portion of the total contract price would be recognized as revenue in 2014? In 2015?
(b) Assuming the same facts as those above except that Hamilton uses the completed-contract method of accounting, what portion of the total contract price would be recognized as revenue in 2015?
(c) Prepare a complete set of journal entries for 2014 (using the percentage-of-completion method). (Credit account titles are automatically indented when amount is entered. Do not indent manually. For costs incurred use account Materials, Cash, Payables.)
2014
2015
Costs incurred during the year $631,410 $1,660,000 Estimated costs to complete, as of December 31 987,590 –0– Billings during the year 386,000 2,398,000 Collections during the year 327,700 1,751,000Explanation / Answer
Precentage of completion in 2014 = 631410/1619000 *100 = 39%
in 2015 = 100 - 39% = 61%
(a)the total contract price would be recognized as revenue in 2014= $2,398,000 * 39% = $935220
in 2015 = $2,398,000 * 61% = $1462780
(b) completed-contract method of accounting, what portion of the total contract price would be recognized as revenue in 2015: 100% contract price i.e. $2,398,000
(c)
Construction in Process Debit $631410
Accounts Payable Credit $631410
Construction Receivable Debit $386000
Process Billing Credit $386000
Construction in process Debit $303810
construction Expenses Debit $631410
Construction Revenue Credit $935220
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