Hamilton Construction Company uses the percentage-of-completion method of accoun

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 $2,508,000. Other details follow:

1,710,000

a. What portion of the total contract price would be recognized as revenue in 2014? In 2015?

b.Prepare all necessary journal entries for 2015, assuming all costs are on account

c.Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used

2014 2015 Costs incurred during the year $729,600 $1,624,500 Estimated costs to complete, as of December 31 1,094,400 –0– Billings during the year 478,800 1,915,200 Collections during the year 399,000 1,710,000Hamilton 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 $2,508,000. Other details follow:
2014 2015 Costs incurred during the year $729,600 $1,624,500 Estimated costs to complete, as of December 31 1,094,400 –0– Billings during the year 478,800 1,915,200 Collections during the year 399,000

1,710,000

a. What portion of the total contract price would be recognized as revenue in 2014? In 2015?

b.Prepare all necessary journal entries for 2015, assuming all costs are on account

c.Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used

Explanation / Answer

Ans a 2014 2015 Total Contract Price 25,08,000.00 25,08,000.00 Actual Cost incurred in 2014     7,29,600.00 16,24,500.00 Estimated cost to complete 10,94,400.00                        -   Total Estimated Cost 18,24,000.00 16,24,500.00 % of completion=Actual Cost/Total Estimated cost 40% 100% Contac price to be recogniced 10,03,200.00 25,08,000.00 Ans b Work in progress 16,24,500.00 Account payable 16,24,500.00 Accounts receivable 19,15,200.00 Construction revenue 19,15,200.00 Cost of construction 23,54,100.00 Work in progress 23,54,100.00 Cash 17,10,000.00 Accounts Receivable 17,10,000.00 Ans c 2014 2015 2015 Cum Total Cost     7,29,600.00 16,24,500.00 23,54,100.00 Cotract Revenue 25,08,000.00 Gross Profit 0 153900     1,53,900.00

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