Question

Arizona Desert Homes (ADH) constructed a new subdivision during 2020 and 2021 under contract with Cactus Development Co. Relevant data are summarized below:
Contract amount $ 3,000,000
Cost: 2020 1,200,000
2021 600,000
Gross profit: 2020 800,000
2021 400,000
Contract billings: 2020 1,500,000
2021 1,500,000
ADH recognizes revenue over time with respect to these contracts.
What would be the journal entry made in 2020 to record revenue?
Accounts receivable 1,500,000
Revenue from long-term contracts 1,500,000
Accounts receivable 2,300,000
Gross profit 800,000
Revenue from long-term contracts 1,500,000
Construction in progress 800,000
Cost of construction 1,200,000
Revenue from long-term contracts 2,000,000
Accounts receivable 1,500,000
Billings in excess of cost 300,000
Revenue for long-term contracts 1,800,000

Answer 1

Answer:

Dr Construction 800000

Dr Cost of construction 1200000

Cr Revenue form long-term contracts 2,000,000

Explanation:

Based on the information given What would be the journal entry made in 2020 to record revenue is :

Dr Construction $800,000

Dr Cost of construction $1,200,000

Cr Revenue form long-term contracts $2,000,000

($800,000+$1,200,000)

(Being to record revenue)