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  • Accounting for Construction Contracts Using Different Methods

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    Merliza Jusayan
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    This document shows journal entries for recognizing revenue and expenses from long-term construction contracts over multiple years using different accounting methods. In 2021-2023, the company recognizes contract revenue, expenses, billings, and cash collections. It presents statement of financial position and statement of comprehensive income accounts under the input, output, and cost recovery methods.

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    LTCC-Problem-2-Complete-Journal-Entries

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    This document shows journal entries for recognizing revenue and expenses from long-term construction contracts over multiple years using different accounting methods. In 2021-2023, the company recognizes contract revenue, expenses, billings, and cash collections. It presents statement of financial position and statement of comprehensive income accounts under the input, output, and cost recovery methods.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    183 views4 pages

    Accounting for Construction Contracts Using Different Methods

    Uploaded by

    Merliza Jusayan
    This document shows journal entries for recognizing revenue and expenses from long-term construction contracts over multiple years using different accounting methods. In 2021-2023, the company recognizes contract revenue, expenses, billings, and cash collections. It presents statement of financial position and statement of comprehensive income accounts under the input, output, and cost recovery methods.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 4

    Problem 2 (input method)

    2021 2022 2023


    Contract Costs (Asset) 35,000,000.00 20,000,000.00 30,000,000.00
    Cash 35,000,000.00 20,000,000.00 30,000,000.00
    To recognize recognition of contract costs as asset

    Construction in Progress 43,750,000.00 25,000,000.00 31,250,000.00


    Revenue from Construction Contract 43,750,000.00 25,000,000.00 31,250,000.00
    To recognize revenue for 2021

    Costs of Construction Contract (P/L) 35,000,000.00 20,000,000.00 30,000,000.00


    Contract Costs (Asset) 35,000,000.00 20,000,000.00 30,000,000.00
    To record amortization of contract costs (matching principle)

    Accounts Receivable 16,000,000.00 28,000,000.00 56,000,000.00


    Progress Billings 16,000,000.00 28,000,000.00 56,000,000.00
    To record billing to customer

    Cash 14,000,000.00 25,000,000.00 61,000,000.00


    Accounts Receivable 14,000,000.00 25,000,000.00 61,000,000.00
    To record collections from customers

    Progress Billings 100,000,000.00


    Construction in Progress 100,000,000.00
    To record closing of progress billings and construction in progress

    SFP (View 1)
    Current Assets
    Accounts Receivable 2,000,000.00 5,000,000.00 -

    Construction in Progress 43,750,000.00 68,750,000.00


    Progress Billings to date - 16,000,000.00 - 44,000,000.00
    Contract Asset (Contract Liability) 27,750,000.00 24,750,000.00 -

    SCI
    Revenue from construction contract 43,750,000.00 25,000,000.00 31,250,000.00
    Costs of construction contract - 35,000,000.00 - 20,000,000.00 - 30,000,000.00
    Realized gross profit 8,750,000.00 5,000,000.00 1,250,000.00
    Problem 2 (input method)
    Alternative entries (PFRS 15) [use contract asset/contract liability instead of CIP and PB]
    2021 2022 2023
    Contract Costs (Asset) 35,000,000.00 20,000,000.00 30,000,000.00
    Cash 35,000,000.00 20,000,000.00 30,000,000.00
    To recognize recognition of contract costs as asset

    Contract Asset 43,750,000.00 25,000,000.00 31,250,000.00


    Revenue from Construction Contract 43,750,000.00 25,000,000.00 31,250,000.00
    To recognize revenue for 2021

    Costs of Construction Contract (P/L) 35,000,000.00 20,000,000.00 30,000,000.00


    Contract Costs (Asset) 35,000,000.00 20,000,000.00 30,000,000.00
    To record amortization of contract costs (matching principle)

    Accounts Receivable 16,000,000.00 28,000,000.00 56,000,000.00


    Contract Asset 16,000,000.00 28,000,000.00 56,000,000.00
    To record billing to customer

    Cash 14,000,000.00 25,000,000.00 61,000,000.00


    Accounts Receivable 14,000,000.00 25,000,000.00 61,000,000.00
    To record collections from customers

    SFP (View 1)
    Current Assets
    Accounts Receivable 2,000,000.00 5,000,000.00 -
    Contract Asset (Contract Liability) 27,750,000.00 24,750,000.00 -

    SCI
    Revenue from construction contract 43,750,000.00 25,000,000.00 31,250,000.00
    Costs of construction contract - 35,000,000.00 - 20,000,000.00 - 30,000,000.00
    Realized gross profit 8,750,000.00 5,000,000.00 1,250,000.00
    Problem 2 (cost recovery method)

    2021 2022 2023


    Contract Costs (Asset) 35,000,000.00 20,000,000.00 30,000,000.00
    Cash 35,000,000.00 20,000,000.00 30,000,000.00
    To recognize recognition of contract costs as asset

    Construction in Progress 35,000,000.00 20,000,000.00 45,000,000.00


    Revenue from Construction Contract 35,000,000.00 20,000,000.00 45,000,000.00
    To recognize revenue for 2021

    Costs of Construction Contract (P/L) 35,000,000.00 20,000,000.00 30,000,000.00


    Contract Costs (Asset) 35,000,000.00 20,000,000.00 30,000,000.00
    To record amortization of contract costs (matching principle)

    Accounts Receivable 16,000,000.00 28,000,000.00 56,000,000.00


    Progress Billings 16,000,000.00 28,000,000.00 56,000,000.00
    To record billing to customer

    Cash 14,000,000.00 25,000,000.00 61,000,000.00


    Accounts Receivable 14,000,000.00 25,000,000.00 61,000,000.00
    To record collections from customers

    Progress Billings 100,000,000.00


    Construction in Progress 100,000,000.00
    To record closing of progress billings and construction in progress

    SFP (View 1)
    Current Assets
    Accounts Receivable 2,000,000.00 5,000,000.00 -

    Construction in Progress 35,000,000.00 55,000,000.00


    Progress Billings to date - 16,000,000.00 - 44,000,000.00
    Contract Asset (Contract Liability) 19,000,000.00 11,000,000.00 -

    SCI
    Revenue from construction contract 35,000,000.00 20,000,000.00 45,000,000.00
    Costs of construction contract - 35,000,000.00 - 20,000,000.00 - 30,000,000.00
    Realized gross profit - - 15,000,000.00
    Problem 2 (output method)

    2021 2022 2023


    Contract Costs (Asset) 35,000,000.00 20,000,000.00 30,000,000.00
    Cash 35,000,000.00 20,000,000.00 30,000,000.00
    To recognize recognition of contract costs as asset

    Construction in Progress 40,000,000.00 25,000,000.00 35,000,000.00


    Revenue from Construction Contract 40,000,000.00 25,000,000.00 35,000,000.00
    To recognize revenue for 2021

    Costs of Construction Contract (P/L) 32,000,000.00 20,000,000.00 33,000,000.00


    Contract Costs (Asset) 32,000,000.00 20,000,000.00 33,000,000.00
    To record amortization of contract costs (matching principle)

    Accounts Receivable 16,000,000.00 28,000,000.00 56,000,000.00


    Progress Billings 16,000,000.00 28,000,000.00 56,000,000.00
    To record billing to customer

    Cash 14,000,000.00 25,000,000.00 61,000,000.00


    Accounts Receivable 14,000,000.00 25,000,000.00 61,000,000.00
    To record collections from customers

    Progress Billings 100,000,000.00


    Construction in Progress 100,000,000.00
    To record closing of progress billings and construction in progress

    SFP (View 1)
    Current Assets
    Accounts Receivable 2,000,000.00 5,000,000.00 -

    Construction in Progress 40,000,000.00 65,000,000.00


    Progress Billings to date - 16,000,000.00 - 44,000,000.00
    Contract Asset (Contract Liability) 24,000,000.00 21,000,000.00 -

    Contract Costs (Asset) 3,000,000.00 3,000,000.00 -

    SCI
    Revenue from construction contract 40,000,000.00 25,000,000.00 35,000,000.00
    Costs of construction contract - 32,000,000.00 - 20,000,000.00 - 33,000,000.00
    Realized gross profit 8,000,000.00 5,000,000.00 2,000,000.00

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