a. Explanation Journalizing: Journalizing is the process which includes recording the transaction of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant edger account. To increase balance of accounts: Debit assets, expenses, loses and credit all liabilities, capital, revenue and gains. To decrease the balance of accounts: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. Journal entries to record the contract for year 2018 are as follows: Journal entry that records construction contract is as follows: Date Account Title and Explanation Post ref. Debit ($) Credit ($) 2018 Construction in progress 15,000 Construction cost 15,000 (Being cost of construction contract recorded) Table (1) Construction in progress is an expense for the company, expenses are debited as per the general rule; therefore construction in progress is debited in the journal entry. Construction contract is the liability for the company, and liabilities are credited with increase in their value; therefore construction contract is credited in the journal entry because it increases the value of liability. Journal entry to record the progress billing on construction contract is as follows: Date Account Title and Explanation Post ref. Debit ($) Credit ($) 2018 Accounts receivables 25,000 Billing on construction in progress 25,000 (Being the billing on construction in progress recorded) Table (2) Account receivable is an asset and assets are debited with the increase in their value; therefore accounts receivables are debited in the journal entry because it increases the value of the asset. Billing on construction in progress is income, incomes are credited as er the general rule; therefore billing on construction in progress is credited in the journal entry. Journal entry to record the cash received is as follows: Date Account Title and Explanation Post ref. Debit ($) Credit ($) 2018 Cash 20,000 Account receivables 20,000 (Being cash received recorded) Table (3) Cash is an asset, increase in asset is debited as per the general rule; therefore cash account is debited in the journal entry. Account receivable is also an asset and decrease in the value of asset is credited as per the general rule; payment of cash against the account receivables decreased the value of asset, therefore accounts receivables is credited in the journal entry. Journal entry to record the long term revenue contract is as follows: Date Account Title and Explanation Post ref. Debit ($) Credit ($) 2018 Construction cost 15,000 Long term revenue contract 15,000 (Being long term contract revenue recorded) Table (4) Construction cost is an expense for the company and increase in expense is debited as per the general rule; therefore construction cost is debited in the journal entry. Long-term revenue contract is the income for the company, incomes are credited as per the general rule; therefore long term revenue contract is credited in the journal entry. Journal entries to record the contract for year 2019 are as follows: Journal entry that records construction contract is as follows: Date Account Title and Explanation Post ref. Debit ($) Credit ($) 2019 Construction in progress 20,000 Construction cost 20,000 (Being cost of construction contract recorded) Table (5) Construction in progress is an expense for the company, expenses are debited as per the general rule; therefore construction in progress is debited in the journal entry. Construction contract is the liability for the company, and liabilities are credited with increase in their value; therefore construction contract is credited in the journal entry because it increases the value of liability. Journal entry to record the progress billing on construction contract is as follows: Date Account Title and Explanation Post ref. Debit ($) Credit ($) 2019 Accounts receivables 23,000 Billing on construction in progress 23,000 (Being the billing on construction in progress recorded) Table (6) Account receivable is an asset and assets are debited with the increase in their value; therefore accounts receivables are debited in the journal entry because it increases the value of the asset. Billing on construction in progress is income, incomes are credited as er the general rule; therefore billing on construction in progress is credited in the journal entry. Journal entry to record the cash received is as follows: Date Account Title and Explanation Post ref. Debit ($) Credit ($) 2019 Cash 20,000 Account receivables 20,000 (Being cash received recorded) Table (7) Cash is an asset, increase in asset is debited as per the general rule; therefore cash account is debited in the journal entry... b. To determine To prepare: T-accounts for construction in progress, billing on construction in progress and accounts receivables. c. To determine Net assets or liability for each year.

2nd Edition

ISBN: 9780134730370

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required…

Question

Chapter 8, Problem 8.11P

To determine

To prepare: Journal entry to record the contract.

To determine

To prepare: T-accounts for construction in progress, billing on construction in progress and accounts receivables.

To determine

Net assets or liability for each year.

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Chapter 8, Problem 8.10P

Chapter 8, Problem 8.12P

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n January 1, 2021, ABC enters into a contract to construct a building for a customer. ABC identifies its performance obligation to satisfied over time. ABC uses the input method based on costs to measure its progress on the contract. The contract price is P9M Information on the construction is provided below: 2021 2022 2023 a. Contract cost incurred per year 2,760,000 3,540,000 500,000 b. Billing per year 50% 25% 25% c. Collections on billings per year d. Estimated costs to complete (at each yr. end) 4,140,000700,000 90% 90% balance Note: Billings per year are stated as percentages of the contract price. The contract is non-cancellable. The collection on billings in 2021 and 2022 are net of 10% retention. "Retention" is an amount withheld by the contracted and payable to the contractor at the end of the contract when the project is completed and accepted. Requirements; a. Compute for the gross profits, 2021 2022 2023

How much is the contract revenue to date in the year 2019? Double Dragon receives a contract to build a building over a period of 3 years for a price of P14,000,000. Information relating to the performance of the contract is summarized as follows: 2019 Construction Costs incurred- yearly 3,000,000 4,840,000 3,360,000 2017 2018 Estimated Costs to Complete 7,000,000 3,360,000 Billings during the year 2,400,000 5,200,000 6,400,000 Collections during the year 2,000,000 5,400,000 6,600,000

Chapter 8 Solutions

Intermediate Accounting (2nd Edition)

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Journal entry to record the contract.

Solution Summary: The author explains the process of journalizing, which includes recording the transaction of an organization in a chronological order.

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To prepare: Journal entry to record the contract.

To prepare: T-accounts for construction in progress, billing on construction in progress and accounts receivables.

Net assets or liability for each year.

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Chapter 8 Solutions