Acct 414

6/13/2013

Prof. Teresa Gordon

5-yr Example - Construction Accounting (with loss)

Colfax Construction Corporation (CCC) has contracted to build 100 miles of highway through a rugged mountain area. The
project will take five years to complete. The contract price is $50,000,000. CCC can bill the State of Washington during
construction on a formula basis. Both parties are expected to fulfill their obligations under the contract.
Total contract revenue:
Construction costs incurred
during year
Progress billings for yr
Collections during year
Est costs to complete

50,000,000
2010
3,400,000
1,500,000
1,000,000
30,600,000
2010

2011
15,500,000
14,500,000
14,750,000
16,100,000

2012
16,300,000
17,000,000
16,500,000
8,800,000

2011

2012

2013
10,700,000
13,000,000
13,500,000
8,100,000
2013

2014
7,100,000
4,000,000
4,250,000
0

Totals
53,000,000
50,000,000
50,000,000

2014

Cost incurred to-date

Estimated total cost
Percentage of completion
Construction revenue to-date
Construction revenue for year
Construction cost for year
Gross profit for year
Gross profit recognized to-date

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Problem

Acct 414

6/13/2013

Example for Class - with loss on contract in last 2 years

JOURNAL ENTRIES
PERCENTAGE OF COMPLETION METHOD

DR

2010

Prof. Teresa Gordon

2011
CR

DR

2012
CR

DR

2013
CR

DR

2014
CR

DR

CR

Construction in Progress
Accts Pay, Cash, etc.
Accounts Receivable
Partial Billings
Cash
Accounts Receivable
Construction Costs
Construction in Progress
Construction Revenue
Closing Entry
Partial Billings
Construction in Progress

T-accounts

151649997.xls.ms_office

Construction in progress

Partial billings

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Accounts Receivable

JEs-% blank

Acct 414

6/13/2013

Example for Class - with loss on contract in last 2 years

JOURNAL ENTRIES
Completed Contract Method (US GAAP only)
Construction in Progress
Accts Pay, Cash, etc.
Accounts Receivable
Partial Billings
Cash
Accounts Receivable

2010

DR
3,400,000
1,500,000
1,000,000
-

Prof. Teresa Gordon

2011
CR
3,400,000
1,500,000
1,000,000

DR
15,500,000
14,500,000
14,750,000
-

2012
CR

DR

15,500,000
14,500,000
14,750,000

16,300,000
17,000,000
16,500,000
-

2013
CR
16,300,000
17,000,000
16,500,000

DR
10,700,000
13,000,000
13,500,000
-

2014
CR
10,700,000
13,000,000
13,500,000

DR

CR

7,100,000
4,000,000
4,250,000
-

7,100,000
4,000,000
4,250,000

Estimated loss on construction contract

Construction in progress
Closing Entry
Partial Billings
Construction revenue
Construction costs
Construction in progress

T-accounts

151649997.xls.ms_office

Construction in progress

Partial billings

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Accounts Receivable

JEs-CC-blank

Acct 414

6/13/2013

Example for Class - with loss on contract in last 2 years

JOURNAL ENTRIES
Zero profit method (IFRS only)

2010

DR

Construction in Progress
Accts Pay, Cash, etc.

3,400,000
1,500,000
1,000,000
-

Accounts Receivable
Partial Billings
Cash
Accounts Receivable

Prof. Teresa Gordon

2011
CR
3,400,000
1,500,000
1,000,000

DR
15,500,000
14,500,000
14,750,000
-

2012
CR

DR

15,500,000
14,500,000
14,750,000

16,300,000
17,000,000
16,500,000
-

2013
CR
16,300,000
17,000,000
16,500,000

DR
10,700,000
13,000,000
13,500,000
-

2014
CR
10,700,000
13,000,000
13,500,000

DR
7,100,000
4,000,000
4,250,000
-

CR
7,100,000
4,000,000
4,250,000

Construction Costs
Construction Revenues

Closing Entry
Partial Billings
Construction revenue
Construction costs
Construction in progress

T-accounts

Construction in progress

Partial billings

Accounts Receivable

151649997.xls.ms_office

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JEs-ZeroProfit-blank