Answer:
Dobson Construction
a) Percentage of completion = $2,400,000/$6,000,000 * 100
= 40%
b) Gross profit for 2018:
Contract Revenue based on 40% = $3,200,000
Costs incurred to date 2,400,000
Gross profit $800,000
c) Journal Entry to record the income:
Debit Accounts receivable $4,500,000
Credit Contract Revenue $3,200,000
Credit Unearned revenue $1,300,000
To record the contract revenue for the year.
Debit Cost of Contract $2,400,000
Debit Electrical and Mechanical Materials $210,000
Credit Cash $2,610,000
To record the contract cost incurred for the year.
Debit Cash $3,800,000
Credit Accounts receivable $3,800,000
To record the billings collected during the year.
d) Accounts and amounts on the Balance Sheet at the end of 2018:
Assets:
Accounts receivable $700,000
Electrical Supplies 210,000
Cash 1,190,000
Liabilities:
Unearned income $1,300,000
Income 800,000
e) The loss that Dobson would report for the year 2018 is:
= $36,000.
Explanation:
a) Data and CAlculations:
Lump-sum price (contract price) $8,000,000
Estimated costs:
Labor $1,700,000
Materials and subcontractor 3,500,000
Indirect costs 800,000 6,000,000
Estimated profit $2,000,000
At the end of the first year, the following was the status of the contract:
Billings to date $4,500,000
Costs incurred to date
Labor $928,000
Materials and subcontractor 1,296,000
Indirect costs 386,000
Total costs incurred to date 2,610,000
Less Electrical and mechanical
materials stored on job site 210,000
Adjusted costs incurred 2,400,000
Latest forecast total cost 6,000,000
Billings collected during the year = $3,800,000
e) Latest forecast total costs = $8,120,000
Contract revenue = 8,000,000
Loss = $120,000
Percentage of completion = $2,400,000/$8,120,000 * 100 = 30%
Loss to report for the year = 30% of $120,000 = $36,000
