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    Part A: Total Revenue Recognized Total Cost Incurred Net Gross Profit

    Uploaded by

    Yusef Shaqeel
    The document discusses the percentage of completion method used by Big Construction Company to recognize revenue over 3 years from 2019 to 2021. It shows the company's statement of income and general journal entries for the period. The percentage of completion formula is used to calculate recognized revenue based on the cost of goods completed. The total expected revenue for the project is $10 million and the total estimated cost is $8 million, resulting in an expected net gross profit of $2 million.

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    Part A: Total Revenue Recognized Total Cost Incurred Net Gross Profit

    Uploaded by

    Yusef Shaqeel
    22 views6 pages
    The document discusses the percentage of completion method used by Big Construction Company to recognize revenue over 3 years from 2019 to 2021. It shows the company's statement of income and general journal entries for the period. The percentage of completion formula is used to calculate recognized revenue based on the cost of goods completed. The total expected revenue for the project is $10 million and the total estimated cost is $8 million, resulting in an expected net gross profit of $2 million.

    Original Description:

    week 7

    Original Title

    WEEK 7_Acc

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    The document discusses the percentage of completion method used by Big Construction Company to recognize revenue over 3 years from 2019 to 2021. It shows the company's statement of income and general journal entries for the period. The percentage of completion formula is used to calculate recognized revenue based on the cost of goods completed. The total expected revenue for the project is $10 million and the total estimated cost is $8 million, resulting in an expected net gross profit of $2 million.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    22 views6 pages

    Part A: Total Revenue Recognized Total Cost Incurred Net Gross Profit

    Uploaded by

    Yusef Shaqeel
    The document discusses the percentage of completion method used by Big Construction Company to recognize revenue over 3 years from 2019 to 2021. It shows the company's statement of income and general journal entries for the period. The percentage of completion formula is used to calculate recognized revenue based on the cost of goods completed. The total expected revenue for the project is $10 million and the total estimated cost is $8 million, resulting in an expected net gross profit of $2 million.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6

    “WEEK 7”

    PART A

    The method used to calculate the gross profit is “percentage of completion method”

    Big Construction Company

    Statement of Income

    For the year ended December 2021

    2019 2020 2021

    Total Revenue Recognized $3.125 million $5 million $1.875 million

    Total cost incurred $2.5 million $4 million $1.5 million

    Net Gross Profit $0.625 million $1 million $0.375 million

    For the recognition of revenue, the following formula is used:

    Sales Recognized = Cost of goods completed and delivered / total COG to be delivered x Total

    revenue that is expected

    Calculation of Recognized Revenue

    The year 2019 = 2.5 million dollars / 8 million dollars x 10 million dollars

    = 0.3125 million dollars x 10 million dollars

    = 3.125 million dollars


    The year 2020 = 4 million dollars / 8 million dollars x 10 million dollars

    = 0.5 million dollars x 10 million dollars

    = 5 million dollars

    The year 2021 = 1.5 million dollars / 8 million dollars x 10 million dollars

    = 0.1875 million dollars x 10 million dollars

    = 1.875 million dollars

    PART B

    Big Construction Company

    General Journal

    Year 2019

    Cost incurred:

    Debit: Construction-In-Progress $2.5 million

    Credit: Cash $2.5 million

    Payments Received:

    Debit: Cash $2 million

    Credit: Account Receivable $2 million

    Revenue Adjustments:
    Debit: Expense of the Construction $2.5 million

    Construction-In-Progress $0.625 million

    Credit: Sales Revenue $3.125 million

    Year 2020

    Cost incurred:

    Debit: Construction-In-Progress $4 million

    Credit: Cash $4 million

    Payments Received:

    Debit: Cash $5 million

    Credit: Account Receivable $5 million

    Revenue Adjustments:

    Debit: Expense of the Construction $4 million

    Construction-In-Progress $1 million

    Credit: Sales Revenue $5 million

    Year 2021

    Cost incurred:

    Debit: Construction-In-Progress $1.5 million


    Credit: Cash $1.5 million

    Payments Received:

    Debit: Cash $3 million

    Credit: Account Receivable $3 million

    Revenue Adjustments:

    Debit: Expense of the Construction $1.5 million

    Construction-In-Progress $0.375 million

    Credit: Sales Revenue $1.875 million

    Project Completion:

    Debit: Billing $10 million

    Credit: Construction-In-Progress $10 million

    PART C

    Calculation of net G.P:

    = Total expected Revenue – Total incurring cost

    = 10 million dollars – 8 million dollars

    = 2 million dollars

    Big Construction Company


    General Journal

    Year 2019

    Cost incurred:

    Debit: Construction-In-Progress $2.5 million

    Credit: Cash $2.5 million

    Payments Received:

    Debit: Cash $2 million

    Credit: Account Receivable $2 million

    Year 2020

    Cost incurred:

    Debit: Construction-In-Progress $4 million

    Credit: Cash $4 million

    Payments Received:

    Debit: Cash $5 million

    Credit: Account Receivable $5 million

    Year 2021

    Cost incurred:
    Debit: Construction-In-Progress $1.5 million

    Credit: Cash $1.5 million

    Payments Received:

    Debit: Cash $3 million

    Credit: Account Receivable $3 million

    Recognition of the revenue:

    Debit: Billings $10 million

    Credit: Sales Revenue (Construction) $10 million

    CIP expense out:

    Debit: Construction cost $8 million

    Credit: Construction-In-Progress $8 million

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