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WIP / Line of Credit / Closing the Doors

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I need help asap with the following:

I. WIP Adjusting Entries:

I work for a general contractor that bids on commercial and residential projects. They do some of the work themselves and they also utilize subcontractors to assist with the work.

How do I properly capture WIP on the books every month? Please provide an example step by step assuming we were awarded a $200,000 project.

I believe I have to record the work that is completed and billed and for the costs that are accumulated during the month.

I see general ledger accounts for "Under-billed" and Over-billed" but cannot figure out whether or not they are accurate, or how they are being calculated.

How do I close out the WIP account after the project is 100% complete?
Lastly, how do I know the numbers I am recording are correct? What is the "check" I can do to ensure I am recording accurately?

II. Line of Credit:

How do I properly record a new line of credit? We are applying for a $500,000 line of credit and I need to know which accounts I have to use.

Also, how do I record usage as we USE the line of credit funds?

III. Closing the Doors:

How do I figure out what would be left if the company had to close its' doors tomorrow? Would you please walk me thru that?

Thank you for your help!!

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Solution Preview

The response addresses the query posted in 781 words with AP references

//The contract for commercial and residential projects needs different accounting entries to record the expenses and revenues. In the next paragraphs, there will be a description of the needed journal entries that can record all the construction costs and billings. There will be a discussion over under billing and over billing to determine the correct billings.//

I WIP Adjusting Entries

The contract for commercial and residential projects needs construction work over a number of years that means there is a need for accounting system that covers such number of years to record all the expenses and the revenues. Capturing of every month expenses on the construction work in the form of work in progress is important for determining the total cost of construction for estimating the net income or loss at the end of the contract. The following given below journal entries, with the assumption that the total work is of $200,000 and period of completion is 2 years, are able to capture all the expenses.

First month
Work in Progress (WIP) $10,000
Cash (or Accounts payable) $10,000
Second month
Work in Progress $15,000
Cash (or Accounts payable) $15,000

Third month
Work in Progress $7,000
Cash (or Accounts payable) $7,000

At the end ...

Solution Summary

The expert determines how to properly capture WIP on the books every month. The response addresses the query posted in 781 words with AP references.

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