Reference no: EM133073798

Question - In 2020, Wildhorse Contractors began construction on an office building. The building was expected to cost $45,270,000 in total, and was expected to be completed in early 2022. The customer was to pay Wildhorse $49,090,000 for the building. Wildhorse was able to use percentage-of-completion accounting for the project, and at the end of 2020 had accumulated $11,317,500 in cost. Wildhorse estimated that the costs to complete the construction were in line with the original expected total costs.

During 2021, there was a lumber shortage, a strike by construction workers, and various other incidents that dramatically raised costs in the construction industry. As a result, at the end of 2021, Wildhorse estimated that the office building would cost $4, 100,000 in total. To the end of 2021, Wildhorse had spent $37,521,200 on constructing the office building.

Calculate the revenue to be recognized by Wildhorse for the 2021 fiscal year.

Prepare the journal entry to record revenue, construction expenses.