Question: Crane Construction Inc., which has a calendar year end, has entered into a non-cancellable fixed price contract for $2.9 million beginning September 1, 2020, to
Crane Construction Inc., which has a calendar year end, has entered into a non-cancellable fixed price contract for $2.9 million beginning September 1, 2020, to build a road for a municipality. It has been estimated that the road construction will be complete by June 2022. The following data pertain to the construction period.
| 2020 | 2021 | 2022 | ||||
| Costs to date | $848,000 | $1,871,250 | $2,428,000 | |||
| Estimated costs to complete | 1,802,000 | 623,750 | 0 | |||
| Progress billings to date (non-refundable) | 890,000 | 2,378,000 | 2,900,000 | |||
| Cash collected to date | 748,000 | 2,271,000 | 2,900,000 |
Using the percentage-of-completion method, calculate the estimated gross profit that would be recognized during each year of the construction period.
| CRANE CONSTRUCTION INC. | ||||
| STATEMENT OF GROSS PROFIT | ||||
| 2020 | 2021 | 2022 | ||
| Gross profit | $80,000 | $223,750 | $168,250 |
Using the percentage-of-completion method, prepare the journal entries for 2020 and 2021. (Use Materials, Cash, Payables for costs incurred to date.)
For the Year 2020:
| (To record cost of Construction) | ||
| (To record Progress billings) | ||
| (To record collections) | ||
| (To record revenues) | ||
| (To record construction expenses) |
Same table for year 2021:
Step by Step Solution
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To solve this problem using the percentageofcompletion method well proceed stepbystep for each year Step 1 Calculate Percentage of Completion The percentage of completion for each year is calculated u... View full answer
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