Recording Long-Term Construction: Recognize Revenue at a Point in Time and Over Time

Watson Construction Company contracted to build a plant for $500,000. Construction started in January 2020 and was completed in November 2021. Watson uses the cost-to-cost method to measure the completion of its performance obligations. Data relating to the contract follow.

a. Provide the 2020 and 2021 journal entries for Watson assuming revenue is recognized at a point in time. Provide entries for (1) construction costs incurred, (2) progress billings, (3) cash collections, and (4) revenues and expenses.

• Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

2020 2021 Costs incurred during year Estimated additional costs to complete Billings during year Cash collections during year $290,000 $120,000 125,000 270,000 230,000 250,000 250,000 Dr. 290,000 0 290,000 270,000 0 O 270,000 Date Account Name 2020 (1) Construction in Process Cash, Payables, etc. 2020 (2) Accounts Receivable Billings on Contracts 2020 (3) Cash Accounts Receivable 2020 (4) Construction in Process Revenue from Long-Term Contracts To record revenue from contract. O 250,000 0 0 0 250,000 0 0 O 0 To record cost of contract. 2021 (1) Construction in Process 120,000 O 120,000 Cash, Payables, etc. 2021 (2) Accounts Receivable 230,000 0 O 230,000 O Billings on Contracts 2021 (3) Cash Accounts Receivable 2021 (4) 250,000 o 250,000 0 0 To record revenue from contract. 0 O To record cost of contract. 2020 2021 Costs incurred during year Estimated additional costs to complete Billings during year Cash collections during year $290,000 $120,000 125,000 270,000 230,000 250,000 250,000 Dr. 290,000 0 290,000 270,000 0 O 270,000 Date Account Name 2020 (1) Construction in Process Cash, Payables, etc. 2020 (2) Accounts Receivable Billings on Contracts 2020 (3) Cash Accounts Receivable 2020 (4) Construction in Process Revenue from Long-Term Contracts To record revenue from contract. O 250,000 0 0 0 250,000 0 0 O 0 To record cost of contract. 2021 (1) Construction in Process 120,000 O 120,000 Cash, Payables, etc. 2021 (2) Accounts Receivable 230,000 0 O 230,000 O Billings on Contracts 2021 (3) Cash Accounts Receivable 2021 (4) 250,000 o 250,000 0 0 To record revenue from contract. 0 O To record cost of contract