Catalina Construction Corporation signed a contract to build an apartment building for $ 5,600,000. The customer controls the building throughout the contract period. Construction began in October 20X4 and was scheduled to be completed in May 20X6. Catalina has a 31 December year- end. Data for the First two years of the contract were as follows:

Late in 20X5, the client made some design changes to the apartment layouts in the upper loors. After negotiations, Catalina agreed to a contract amendment that increased the total price to $ 6,400,000 and delayed the completion date until 31 October 20X6. Catalina estimated that the contract change would increase total costs by $ 600,000 (not included in the $ 900,000 “costs to complete” for 20X5 above). Actual costs incurred during 20X6 were $ 1,650,000. The full remaining contract price was billed during 20X6. By the end of 20X6, the client had paid the full contract price except for the 10% holdback permitted by law for 90 days.

Required: 

Prepare the journal entries for Catalina. Use costs incurred to date divided by total estimated construction costs to measure percentage complete. Round your estimate of revenue to the nearest thousand.

Transcribed Image Text:

20X4 20X5 $2,900 2,900 (in thousands of dollars) Costs incurred during year Estimated additional costs to complete Billings during year Cash collections during year $850 4,200 700 650 900 2,600