Thrasher Construction Co. was contracted to construct a building for $915,000. The building is owned by the customer throughout the contract period. The contract provides for progress payments. Thrashers accounting year ends 31 December. Work began under the contract on 1 July 20X5, and was completed on 30 September 20X7. Construction activities are summarized below by year:

20X5	Construction costs incurred during the year, $168,700; estimated costs to complete, $590,500; progress billings during the year, $143,300; and collections, $131,200.
20X6	Construction costs incurred during the year, $421,700; estimated costs to complete, $178,100; progress billing during the year, $358,400; and collections, $356,200.
20X7	Construction costs incurred during the year, $183,000. Because the contract was completed, the remaining balance was billed and later collected in full per the contract.

Assume that the building is owned by Thrasher throughout the construction period and title is transferred to the customer only once the building is fully constructed. Prepare the journal entries required to record the events from 20X5 to 20X7.

Record the following entries for each year using the account bank:

• No journal entry required
• Accounts receivable
• Cash
• Construction costs
• Construction-in-progress inventory
• Contract asset
• Contract costs
• Contract liability
• Cost of goods sold
• Revenue - Construction

2015 & 2016

• Record the construction costs incurred.

• Record the progress billings.

• Record the collection of billings

2017

• Record the construction costs incurred.

• Record the progress billings.

• Record the collection of billings.

• Record the transfer of construction in progress to construction cost.

• Record the transfer of contract liability to recognize revenue..

2. Calculate the balances that would be shown on the SCI and SFP for this contract for each year.

20X5 20x6 20X7 Statement of financial position: Current assets: AR Inventory: Construction in progress inventory Liabilities: Contract liability Income statement: Income on construction (net) 20X5 20x6 20X7 Statement of financial position: Current assets: AR Inventory: Construction in progress inventory Liabilities: Contract liability Income statement: Income on construction (net)