Hamilton Construction Company uses the percentage-of-completion method of accoun
ID: 2422699 • 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 $2,084,000. Other details follow:
2014
2015
(a) What portion of the total contract price would be recognized as revenue in 2014? In 2015?
Revenue recognized in 2014:
Revenue Recognized 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?
Revenue recognized 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 $633,750 $1,754,000 Estimated costs to complete, as of December 31 991,250 –0– Billings during the year 399,000 2,084,000 Collections during the year 291,000 1,768,000Explanation / Answer
(a)
Year 2014 [$633750/($633750+991250)]*$2,084,000=$812760
Year 2015 $2,084,000 (contract price) - $812760 (revenue recognized in 2014)
= $1271240 (revenue recognized in 2015).
Answer:(b) All $2,084,000 of the contract price is recognized as revenue in 2015.
Answer:(c) Journal entry:
Construction in process A/C Dr. $633,750
To Material, cash, payables,etc A/C $633750
Account receivable A/C Dr. $399000
To Billings on construction in process A/C $399000
Cash A/C Dr. $291000
To Accounts Receivable A/C $291000
Construction in process A/C Dr. $266400
Construction expense A/C Dr. $633750
To Revenue from long term contracts A/C $812760
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