Magnum Construction Contracted to Construct a Factory Building for $545,000

Essay

Magnum Construction contracted to construct a factory building for $545,000. The company started during 2012 and was completed in 2013. Information relating to the contract is as follows:
$\begin{array}{|l|l|l|}\hline & 2012 & 2013 \\\hline \text { Costs incurred during the year } & \$ 310,000 & \$ 170,000 \\\hline \text { Estimated additional cost to complete } & 165,000 & - \\\hline \text { Billings during the year } & 280,000 & 285,000 \\\hline \text { Cash collections during the year } & 260,000 & 305,000 \\\hline\end{array}$
Required:
Record the preceding transactions in Magnum's books under completed-contract and the percentage of completion methods. Determine amounts that will be reported on the balance sheet at the end of 2012.
$\begin{array}{llcc} \text { Conpleted-Contract Method } & \\\underline{ \text { Year 2012 } }&\\ \text {DR Construction in progress } &\$310,000\\ \text {CR Cash, payables, materials, etc. } &&\$310,000\\ \text {DR Accounts receivable } &\$280,000\\ \text { CR Billings on contract } &\$280,000&\\ \text { DR Cash } &\$260,000\\ \text { CR Accountsreceivable } &&\$260,000\\ \text { Since the project is incomplete, no revenue is recogrized for the } &\\ \text {year } &\\ \text { 2012} &\\\end{array}$
$\begin{array}{llcc} \text { Percentige-of-Conpletion Method} & \\\underline{ \text { Year 2012}}\\ \text { DR Construction in progress } &\$310,000\\ \text {CR Cash, payables, materials, etc. } &&\$310,000\\ \text { DR Accounts receivable } &\$280,000\\ \text { CR Billings on contract } &&\$280,000\\ \text {DR Cash } &\$260,000\\ \text { CR Accountsreceivable} &&\$260,000\\\end{array}$
$\begin{array}{llcc} \text {DR Construction in progress' } &\$45,684 \\ \text { CR Income onlong-term } &\\ \text { construction contracts} &&\$45,684\\\underline{\text {Alteminte entry:}}\\ \text { DR Construction in progress} &\$45,68\\ \text { DR Construction expense } &4\\ \text { CR Construction revenue* } &310,000&\$355,684\\ \text {"Contract price } &&\$545,000\\ \text { - Actual coststo date } &(\$310,000)\\ \text { - Estimated costs to complete } &\underline{(165,000)}\\ \text {Total estimated costs of project } &&\underline{(475,00)}\\ \text { Estimated total grossmargin } &&\$70,000\\\end{array}$