MSK Construction Company contracted to construct a factory building for $525,000. Construction started during 20X1 and was completed in 20X2. Information relating to the contract follows: 20X120X2Costs incurred during the year$290,000 $150,000 Estimated additional cost to complete 145,000 — Billings during the year 260,000 265,000 Cash collections during the year 240,000 285,000 Required:Record the preceding transactions in MSK’s books assuming it recognizes revenue over time and uses costs incurred to measure the extent to which its performance obligation has been satisfied.Record the preceding transactions in MSK’s books assuming it recognizes revenue at a point in time when control of the completed factory is transferred to the customer at the end of the project.Question: Prepare the entry to record revenue, expense, and completion of the project.

Construction contracts are those contracts in which some services related to construction needs to be provided by contractor to the client. In these case, revenue can be recognised over time or at a particular point in time.Working notes:

Answered: MSK Construction Company contracted to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

MSK Construction Company contracted to construct a factory building for $525,000. Construction started during 20X1 and was completed in 20X2. Information relating to the contract follows:

	20X1	20X2
Costs incurred during the year	$	290,000	$	150,000
Estimated additional cost to complete		145,000		—
Billings during the year		260,000		265,000
Cash collections during the year		240,000		285,000

Required:

Record the preceding transactions in MSK’s books assuming it recognizes revenue over time and uses costs incurred to measure the extent to which its performance obligation has been satisfied.
Record the preceding transactions in MSK’s books assuming it recognizes revenue at a point in time when control of the completed factory is transferred to the customer at the end of the project.

Question: Prepare the entry to record revenue, expense, and completion of the project.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions