Fender Construction Company receives a contract to construct a building over a period of 3 years for a price of $700,000. The contract represents a single performance obligation that will be satisfied over time. Information relating to the performance of the contract is summarized as follows: 201920202021Construction costs incurred during the year$150,000$242,000$168,000Estimated costs to complete350,000168,000—Billings during the year120,000250,000330,000Collections during the year100,000260,000340,000 Required:1.Prepare journal entries for all 3 years.2.Assume that the contract represents a single performance obligation that will be satisfied at a point in time. Prepare journal entries for all 3 years.1. Assume the contract represents a single performance obligation that will be satisfied over time. Prepare journal entries on December 31 for all 3 years-to record costs of construction for cash-to record partial billings-to record collections on account-to record gross profit recognized-to close out construction accounts in 2021.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Fender Construction Company receives a contract to construct a building over a period of 3 years for a price of $700,000. The contract represents a single performance obligation that will be satisfied over time. Information relating to the performance of the contract is summarized as follows:

	2019	2020	2021
Construction costs incurred during the year	$150,000	$242,000	$168,000
Estimated costs to complete	350,000	168,000	—
Billings during the year	120,000	250,000	330,000
Collections during the year	100,000	260,000	340,000

Required:

1.	Prepare journal entries for all 3 years.
2.	Assume that the contract represents a single performance obligation that will be satisfied at a point in time. Prepare journal entries for all 3 years.

1. Assume the contract represents a single performance obligation that will be satisfied over time. Prepare journal entries on December 31 for all 3 years

-to record costs of construction for cash

-to record partial billings

-to record collections on account

-to record gross profit recognized

-to close out construction accounts in 2021.

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