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1 September, 01:01

Arizona Desert Homes (ADH) constructed a new subdivision during 2017 and 2018 under contract with Cactus Development Co. Relevant data are summarized below: Contract amount $ 2,550,000 Cost: 2017 1,100,000 2018 500,000 Gross profit: 2017 650,000 2018 300,000 Contract billings: 2017 1,275,000 2018 1,275,000 ADH recognizes revenue upon completion of the contract. What is the journal entry in 2018 to record revenue?

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  1. 1 September, 02:23
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    The Journal entry is as follows:

    Construction in progress A/c Dr. $950,000

    Cost of construction A/c Dr. $1,600,000

    To revenue from long term contracts $2,550,000

    (To record the revenue in 2018)

    Workings:

    Cost of construction:

    = cost of 2017 + cost of 2018

    = $1,100,000 + $500,000

    = $1,600,000
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