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Prepare the journal entry to record construction costs

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Gale Construction was awarded a contract to construct two major freeways in Edmonton at a total contract price of $ 10,000,000. The estimated total costs to complete the project were $ 8,000,000, and it is expected to take two years.

Using the percentage-of-completion method:

Problem a. Prepare the journal entry to record construction costs of $ 4,400,000 for the first year.

Problem b. Prepare the journal entry to record progress billings of $ 5,000,000 for the first year.

Problem c. Prepare the journal entry to recognize the revenue and gross profit for the first year.

Problem d. What balances are left on the balance sheet at the end of the first year and what do they tell the financial statement users?

Reference no: EM132994620

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