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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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