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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

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.

 20202021
Costs incurred during year$290,000$120,000
Estimated additional costs to complete125,0000
Billings during year270,000230,000
Cash collections during year250,000250,000
  • Revenue Recognized at a Point in Time
  • Revenue Recognized Over Time

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).

 

DateAccount NameDr.Cr.
2020 (1)AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 Cash, Payables, etc.AnswerAnswer
2020 (2)AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
2020 (3)AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
2020 (4)AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 To record revenue from contract.  
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 To record cost of contract.  
2021 (1)AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 Cash, Payables, etc.AnswerAnswer
2021 (2)AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
2021 (3)AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
2021 (4)AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 To record revenue from contract.  
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 AnswerCashAccounts ReceivableAccounts PayableRetained EarningsConstruction in ProcessBillings on ContractsRevenue from Long-Term ContractsCost of ConstructionLoss from Long-Term ContractsN/AAnswerAnswer
 To record cost of contract.

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