Explanation Transaction Price: Transaction price refers to the price that a corporation receives or expects to receive in the future for the goods and services provided. Percentage of Completion Method: Percentage of completion method recognizes revenue for the completed part of the project. This method is used when the contract spans for multiple accounting period like construction projects. Journal entry for the 2018: Entry for actual cost incurred Date Account Title and Explanation Post. ref. Amount ($) Amount ($) Construction in progress 350,000 Cash 350,000 (To record cost of construction) Table (1) Construction in progress account is the asset account because completion of the work increases the assets of the company that is why it is debited. Cash account is the assets account. Since, the cash has been paid to the suppler and worker due to which cash of the company is decreasing that is why cash accounts will credit. Journal entry for billing Date Account Title and Explanation Post. Ref. Amount ($) Amount ($) Account receivables 500,000 Billing in receivable 500,000 (To record billing) Table (2) Accounts receivable is the assets account. Since, during the construction account receivable is received which increase the assets of the company that is why it is debited Billing in receivable is decreasing due to which assets of the company are decreasing that is why it will be credited. Journal entry of cash collection Date Account Title and Explanation Post. Ref. Amount ($) Amount ($) Cash 400,000 Account receivables 400,000 (To record cash received) Table (3) Cash account is the asset account as the cash has been received due to which assets of the company increased that is why cash account is debited. Account receivable is the assets account and the account receivable is decreasing that is why it is credited. Journal entry for the revenue and gross profit Date Account Title and Explanation Post. Ref. Amount ($) Amount ($) Construction costs 350,000 Revenue for long term project 350,000 (To record cost and revenue) Table (4) Construction cost account is the expense account. Since, the expense of the company is increased that is why the construction cost account is debited. Revenue for long term project is the real account. Since, the revenue of the company increased that is why it will be credited. Journal entry for 2019: Entry for actual cost incurred Date Account Title and Explanation Post. ref. Amount ($) Amount ($) Construction in progress 525,000 Cash 525,000 (To record cost of construction) Table (1) Construction in progress account is the asset account because completion of the work increases the assets of the company that is why it is debited. Cash account is the assets account. Since, the cash has been paid to the suppler and worker due to which cash of the company is decreasing that is why cash accounts will credit. Journal entry for billing Date Account Title and Explanation Post. Ref. Amount ($) Amount ($) Account receivables 300,000 Billing in receivable 300,000 (To record billing) Table (2) Accounts receivable is the assets account. Since, during the construction account receivable is received which increase the assets of the company that is why it is debited Billing in receivable is decreasing due to which assets of the company are decreasing that is why it will be credited. Journal entry of cash collection Date Account Title and Explanation Post. Ref. Amount ($) Amount ($) Cash 350,000 Account receivables 350,000 (To record cash received) Table (3) Cash account is the asset account as the cash has been received due to which assets of the company increased that is why cash account is debited. Accounts receivable is the assets account and the account receivable is decreasing that is why it is credited. Journal entry for the revenue and gross profit Date Account Title and Explanation Post. Ref. Amount ($) Amount ($) Construction cost 525,000 Revenue for long term project 525,000 (To record cost and revenue) Table (4) Construction cost account is the expense account. Since, the expense of the company is increased that is why the construction cost account is debited. Revenue for long term project is the real account. Since, the revenue of the company increased that is why it will be credited. Journal entry for 2020: Entry for actual cost incurred Date Account Title and Explanation Post. ref. Amount ($) Amount ($) Construction in progress 50,000 Cash 50,000 (To record cost of construction) Table (1) Construction in progress account is the asset account because completion of the work increases the assets of the company that is why it is debited. Cash account is the assets account. Since, the cash has been paid to the suppler and worker due to which cash of the company is decreasing that is why cash accounts will credit. Journal entry for billing Date Account Title and Explanation Post. Ref. Amount ($) Amount ($) Account receivables 200,000 Billing in receivable 200,000 (To record billing) Table (2) Accounts receivable is the assets account...

3rd Edition

ISBN: 9780136912644

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

Publisher: Pearson Education (US)

See similar textbooks

Concept explainers

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 8.16E

To determine

To prepare: The journal entry for the each year of contract.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 8, Problem 8.15E

Chapter 8, Problem 8.17E

Students have asked these similar questions

Why do companies make adjusting entries? When are adjusting entries made and at what point in the accounting process?

correct solution i need

Prepare the journal entries to account for the defined benefit pension plan in the books of Flagstaff Ltd for the year ended December 31 2020 and the pension table for the following pic.

Chapter 8 Solutions

Intermediate Accounting

Ch. 8 - What are the primary issues involved in revenue...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - Prob. 8.4Q Ch. 8 - Prob. 8.5Q Ch. 8 - How is a performance obligation defined?Ch. 8 - What are the two criteria to define a good or...Ch. 8 - Prob. 8.8Q Ch. 8 - What principles regarding timing and measurement...Ch. 8 - Prob. 8.10Q

Ch. 8 - What is variable consideration and what factors...Ch. 8 - Describe and contrast the two approaches used to...Ch. 8 - Prob. 8.13Q Ch. 8 - What factors should accountants consider to...Ch. 8 - Prob. 8.15Q Ch. 8 - How does a seller account for any consideration...Ch. 8 - Prob. 8.17Q Ch. 8 - What are the two exceptions to the general rule...Ch. 8 - What are the three criteria required to recognize...Ch. 8 - When an entity does not meet the three criteria...Ch. 8 - Prob. 8.21Q Ch. 8 - Prob. 8.22Q Ch. 8 - How does a firm estimate the degree completed...Ch. 8 - Can a firm record inventory out on consignment as...Ch. 8 - What method do agents in a transaction use to...Ch. 8 - Prob. 8.26Q Ch. 8 - What qualitative disclosures do the standards...Ch. 8 - All of the following are elements of a contract...Ch. 8 - Prob. 8.2MC Ch. 8 - Telecom Co. enters into a two-year contract with a...Ch. 8 - The transaction price must reflect the time value...Ch. 8 - Prob. 8.5MC Ch. 8 - When allocating the transaction price to separate...Ch. 8 - Which of the following indicators is not...Ch. 8 - During Yoar 1 Moriwothor Construction Company...Ch. 8 - All of the following are indicators that the...Ch. 8 - Prob. 8.10MC Ch. 8 - Prob. 8.11MC Ch. 8 - Identify a Contract with a Customer. Complete the...Ch. 8 - Prob. 8.2BE Ch. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Estimating Variable Consideration. Gear Garage...Ch. 8 - Estimating Variable Consideration. Using the...Ch. 8 - Estimating Variable Consideration. Sellet...Ch. 8 - Estimating Variable Consideration. Seliet...Ch. 8 - Prob. 8.9BE Ch. 8 - Allocation of Transaction Price. Martin Software...Ch. 8 - Prob. 8.11BE Ch. 8 - Allocation of Transaction Price. Sycamore Sidewalk...Ch. 8 - Allocation of Transaction Price. Sycamore enters...Ch. 8 - Prob. 8.14BE Ch. 8 - Allocation of Transaction Price. Using the...Ch. 8 - When to Recognize Revenue. For each scenario...Ch. 8 - Prob. 8.17BE Ch. 8 - Prob. 8.18BE Ch. 8 - Prob. 8.19BE Ch. 8 - Prob. 8.20BE Ch. 8 - Sales with the Right of Return. Both incorporated...Ch. 8 - Sales with the Right of Return. Using the...Ch. 8 - Sales Returns. Historically, about 5% or the...Ch. 8 - Sales on Consignment. Hanna Lighting recertify...Ch. 8 - Determining Performance Obligations. Pagit Inc, a...Ch. 8 - Prob. 8.2E Ch. 8 - Estimating Variable Consideration. King Rat Pest...Ch. 8 - Prob. 8.4E Ch. 8 - Prob. 8.5E Ch. 8 - Prob. 8.6E Ch. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Prob. 8.9E Ch. 8 - Prob. 8.10E Ch. 8 - Determination of When to Recognize Revenue. Far...Ch. 8 - Prob. 8.12E Ch. 8 - Prob. 8.13E Ch. 8 - Prob. 8.14E Ch. 8 - Prob. 8.15E Ch. 8 - Prob. 8.16E Ch. 8 - Prob. 8.17E Ch. 8 - Prob. 8.18E Ch. 8 - Prob. 8.19E Ch. 8 - Other Principal Agent Transactions, Net Revenue...Ch. 8 - Prob. 8.1P Ch. 8 - Prob. 8.2P Ch. 8 - Comprehensive Revenue Recognition Problem. Casale...Ch. 8 - Prob. 8.4P Ch. 8 - Determining When to Recognize Revenue. Megrew...Ch. 8 - Prob. 8.6P Ch. 8 - Prob. 8.7P Ch. 8 - Prob. 8.8P Ch. 8 - Prob. 8.9P Ch. 8 - Prob. 8.10P Ch. 8 - Prob. 8.11P Ch. 8 - Prob. 8.12P Ch. 8 - Prob. 1JC Ch. 8 - Prob. 1FSC Ch. 8 - Prob. 2FSC Ch. 8 - Prob. 1SSC Ch. 8 - Prob. 1BCC

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.