2. 7-1 Construction Accounting Chapter 7 Illustrated Solution: Problem 7-32

3. 7-2 Billings and Collections n Billings and Collections do not match up (exactly) with Revenues and Expenses during the construction period. n Construction-In-Process: Think of this account as an inventory account like Work- In-Process. This account will hold our expenditures and our profit during the construction period. n Progress Billings: This account is like a contra-inventory account that offsets Construction-In-Process on the Balance Sheet.

4. 7-3 Part 1 A=L +OE Cash Construction in Progress Accounts Receivable Progress Billings on Construction Contracts Cost of Long-Term Construction Revenue from Long- Term Contracts

5. 7-4 Part 1 Cash Construction in Progress Accounts Receivable Progress Billings on Construction Contracts Cost of Long-Term Construction Revenue from Long- Term Contracts  4,600,000 A=L +OE

6. 7-5 Part 1 Cash Construction in Progress Accounts Receivable Progress Billings on Construction Contracts Cost of Long-Term Construction Revenue from Long- Term Contracts  4,600,000 2 5,000,000 A=L +OE

7. 7-6 Part 1 Cash Construction in Progress Accounts Receivable Progress Billings on Construction Contracts Cost of Long-Term Construction Revenue from Long- Term Contracts  4,600,000 3 4,500,000  4,600,000 2 5,000,000 3 4,500,000 2 5,000,000 A=L +OE

8. 7-7 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

9. 7-8 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

10. 7-9 Part 1 Cash Construction in Progress Accounts Receivable Progress Billings on Construction Contracts Cost of Long-Term Construction Revenue from Long- Term Contracts  4,600,000 3 4,500,000  4,600,000 4 4,414,4004 4,960,000 2 5,000,000 3 4,500,000 2 5,000,000 A=L +OE

11. 7-10 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

12. 7-11 Part 1 Cash Construction in Progress Accounts Receivable Progress Billings on Construction Contracts Cost of Long-Term Construction Revenue from Long- Term Contracts  4,600,000 3 4,500,000  4,600,000 4 545,600 4 4,414,4004 4,960,000 2 5,000,000 3 4,500,000 2 5,000,000 A=L +OE

13. 7-12 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

14. 7-13 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

15. 7-14 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

16. 7-15 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

17. 7-16 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method {

18. 7-17 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

19. 7-18 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

20. 7-19 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

21. 7-20 Costs and Estimated Earnings In Excess of Billings and Billings in Excess of Costs and Estimated Earnings Under the Percentage-of-Completion Method

22. 7-21 Part 2 Construction in Progress………4,600,000 Materials, Labor, Cash, etc.4,600,000 Accounts Receivable………….5,000,000 Progress Billings on Construction Contracts….5,000,000 Cash…………………………….4,500,000 Accounts Receivable……..4,500,000 Cost of Long-Term Construction Contracts……..4,414,400 Construction in Progress…….545,600 Revenue From Long-Term Construction Contracts…4,960,000 2001

23. 7-22 Part 2 Construction in Progress………4,600,0004,500,0005,250,000 Materials, Labor, Cash, etc.4,600,0004,500,0005,250,000 Accounts Receivable………….5,000,0006,000,0005,000,000 Progress Billings on Construction Contracts….5,000,0006,100,0005,000,000 Cash…………………………….4,500,0005,400,0006,100,000 Accounts Receivable……..4,500,0005,400,0006,100,000 Cost of Long-Term Construction Contracts……..4,414,4003,821,6006,114,000 Construction in Progress…….545,600498,400606,000 Revenue From Long-Term Construction Contracts…4,960,0004,320,0006,720,000 200120022003

24. 7-23 Part 2 Construction in Progress………4,600,0004,500,0005,250,000 Materials, Labor, Cash, etc.4,600,0004,500,0005,250,000 Accounts Receivable………….5,000,0006,000,0005,000,000 Progress Billings on Construction Contracts….5,000,0006,100,0005,000,000 Cash…………………………….4,500,0005,400,0006,100,000 Accounts Receivable……..4,500,0005,400,0006,100,000 Cost of Long-Term Construction Contracts……..4,414,4003,821,6006,114,000 Construction in Progress…….545,600498,400606,000 Revenue From Long-Term Construction Contracts…4,960,0004,320,0006,720,000 Progress Billings on Construction Contracts………16,000,000 Construction in Progress… No entry No entry 16,000,000 200120022003

25. 7-24 Part 3 Construction in Progress…………………………5,250,000 Materials, Labor, Cash, etc………………….5,250,000 Accounts Receivable……………………………..5,000,000 Progress Billings on Construction Contracts…………………………………….5,000,000 Cash………………………………………………..6,100,000 Accounts Receivable………………………..6,100,000 2003

26. 7-25 Part 3 Construction in Progress…………………………5,250,000 Materials, Labor, Cash, etc………………….5,250,000 Accounts Receivable……………………………..5,000,000 Progress Billings on Construction Contracts…………………………………….5,000,000 Cash………………………………………………..6,100,000 Accounts Receivable………………………..6,100,000 Cost of Long-Term Construction Contracts…….14,350,000 Construction in Progress…………………….14,350,000 Progress Billings on Construction Contracts…..16,000,000 Revenue From Long-Term Construction Contracts……………………………………16,000,000 2003

27. 7-26 Part 4 Cost of Long-Term Construction Contracts……..4,600,0004,500,0005,250,000 200120022003 The following entry would be the only one different from Part (2):

28. 7-27 Part 4 Cost of Long-Term Construction Contracts……..4,600,0004,500,0005,250,000 Construction in Progress…….545,600498,400606,000 200120022003 The following entry would be the only one different from Part (2):

29. 7-28 Part 4 Cost of Long-Term Construction Contracts……..4,600,0004,500,0005,250,000 Construction in Progress…….545,600498,400606,000 Revenue From Long-Term Construction Contracts…5,145,6004,998,4005,856,000 200120022003 The following entry would be the only one different from Part (2):

30. 7-29 End of Problem