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Accounting: Gross Profit And Journal Entries

In 2012, Gurney Construction Company agrees to construct an apartment building at a price of $1,200,000. The information relating to the costs and buildings for the contract shown below:

Costs 2012 2013 2014
Costs incurred to date $280,000 $600,000 $785,000
Estmated costs yet incurred 520,000 200,000 0
Customer billings to date 150,000 500,000 1,200,000
collection to billings to date 120,000 320,000 940,000

(a) Assuming that the percentage of competition method is used:
1. Compute the amount of gross profit to be recognized in 2012 and 2013
2. Prepare g=f journal entries for 2013

(b) For 2013 show the detail related to this construction contract would be disclosed on the balance sheet and on the income statement.

Solution Summary

The solution gives detailed steps on computing the gross profit for a specifc question and then preparing a journey entry. All formula and calculations are shown and explained.