Hamilton Construction Company uses the percentage-of-completion method of accoun
ID: 2445847 • 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 $2,442,000. Other details follow:
Instructions
What portion of the total contract price would be recognized as revenue in 2014? In 2015?
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?
Prepare a complete set of journal entries for 2014 (using the percentage-of-completion method).
2014 2015 Costs incurred during the year $710,400 $1,581,750 Estimated costs to complete, as of December 31 1,065,600 –0– Billings during the year 466,200 1,864,800 Collections during the year 388,500 1,665,000Explanation / Answer
Answer: (a)
Year 2014 [$710,400/($710,400+1,065,600)]*$2,442,000=$976800
Year 2015 $2,442,000 (contract price) minus $976800 (revenue recognized in 2014) = $1465200 (revenue recognized in 2015).
Answer:(b) All $2,442,000 of the contract price is recognized as revenue in 2015.
Answer:(c) Journal entry:
Construction in process A/C Dr. $710,400
To Material, cash, payables,etc A/C $710,400
Account receivable A/C Dr. $466,200
To Billings on construction in process A/C $466,200
Cash A/C Dr. $388500
To Accounts Receivable A/C $388500
Construction in process A/C Dr. $266400
Construction expense A/C Dr. $710,400
To Revenue from long term contracts A/C $976800
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