Question

10. Dixon Construction Company was awarded a contract to construct an interchange at the junction of U.S. 94 and Highway 30 at a total contract price of $15,000,000. The estimated total costs to complete the project were $12,000,000. (a) Make the entry to record construction costs of $7,200,000, on construction in process to date. (b) Make the entry to record progress billings of $4,000,000. (c) Make the entry to recognize the profit that can be recognized to date, on a percentage-of- completion basis.

Answer 1

Answer:

Journal Entry

Explanation:

                      Books of (Dixon Construction Company)

                                      Journal Entry

Date   Account Title and Explanation            Debit       Credit

A.     Construction in process       A/c Dr.   $7,200,000

        Cash / Accounts payable    A/c                            $7,200,000

      (Being construction cost paid)

B.     Accounts receivables           A/c Dr.   $4,000,000

         Billing in progress                A/c                           $4,000,000

        (Being record of billing in progress)

C.    Construction expenses         A/c Dr.    $7,200,000

       Construction in process        A/c Dr.    $1,800,000

          Revenue from construction  A/c                           $9,000,000

          (Being income generate from contract)

Note:

Revenue from construction = Total contract(Construction in process / estimated total costs to complete)

Revenue from construction =  $15,000,000($7,200,000 / $12,000,000)

Revenue from construction =  $9,000,000

Construction in process = Revenue from construction - Construction expenses  

Construction in process = $9,000,000 - $7,200,000

Construction in process = $1,800,000