Jorg is building an office building for Wilmington Company for $20,000,000. The contract has the following characteristics: • The office building is built to the customer’s specifications and the customer can make changes to these specifications over the contract term. • Progress payments are made by the customer throughout construction. • The customer can cancel the contract at any time (with a termination penalty); any work in process is the property of the customer. Jorg provides you with the following details: December 31 Year 1 Year 2 Year 3 Costs incurred to date $8,000,000 $16,000,000 $18,000,000 Estimated costs to complete 6,000,000 3,000,000 — Billings to date 8,000,000 16,000,000 20,000,000 Collections to date 6,000,000 12,000,000 18,000,000 Prepare journal entries on December 31 for all 3 years. 1. to record costs of construction for cash. 2. to record partial billings. 3. to record collections on account. 4. to record gross profit recognized. 5. to close out construction accounts in Year 3.
Jorg is building an office building for Wilmington Company for $20,000,000. The contract has the following characteristics: • The office building is built to the customer’s specifications and the customer can make changes to these specifications over the contract term. • Progress payments are made by the customer throughout construction. • The customer can cancel the contract at any time (with a termination penalty); any work in process is the property of the customer. Jorg provides you with the following details: December 31 Year 1 Year 2 Year 3 Costs incurred to date $8,000,000 $16,000,000 $18,000,000 Estimated costs to complete 6,000,000 3,000,000 — Billings to date 8,000,000 16,000,000 20,000,000 Collections to date 6,000,000 12,000,000 18,000,000 Prepare journal entries on December 31 for all 3 years. 1. to record costs of construction for cash. 2. to record partial billings. 3. to record collections on account. 4. to record gross profit recognized. 5. to close out construction accounts in Year 3.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Jorg is building an office building for Wilmington Company for $20,000,000. The contract has the following characteristics:
| • | The office building is built to the customer’s specifications and the customer can make changes to these specifications over the contract term. |
| • | Progress payments are made by the customer throughout construction. |
| • | The customer can cancel the contract at any time (with a termination penalty); any work in process is the property of the customer. |
Jorg provides you with the following details:
|
|
December 31
|
||
|
Year 1
|
Year 2
|
Year 3
|
|
| Costs incurred to date | $8,000,000 | $16,000,000 | $18,000,000 |
| Estimated costs to complete | 6,000,000 | 3,000,000 | — |
| Billings to date | 8,000,000 | 16,000,000 | 20,000,000 |
| Collections to date | 6,000,000 | 12,000,000 | 18,000,000 |
Prepare journal entries on December 31 for all 3 years.
| 1. | to record costs of construction for cash. |
| 2. | to record partial billings. |
| 3. | to record collections on account. |
| 4. | to record gross profit recognized. |
| 5. | to close out construction accounts in Year 3. |
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