MSK Construction Company contracted to construct a factory building for $525,000. Construction started during 20X1 and was completed in 20X2. Information relating to the contract follows:

MSK Construction Company contracted to construct a factory building for $525,000. Construction started during 20X1 and was completed in 20X2. Information relating to the contract follows:

                                                                                                           20X1                     20X2

Costs incurred during the year                                                  $290,000                $150,000 

Estimated additional cost to complete                                     145,000                     —

Billings during the year                                                                   260,000                  265,000 

Cash collections during the year                                                    240,000                   285,000 

Required:

1. Record the preceding transactions in MSK’s books assuming it recognizes revenue over time and uses costs incurred to measure the extent to which its performance obligation has been satisfied.
2. Record the preceding transactions in MSK’s books assuming it recognizes revenue at a point in time when control of the completed factory is transferred to the customer at the end of the project.

Prepare the entry to record the construction costs incurred. Hint: Use Cash, payables, materials, etc.

Prepare the entry to record the amounts billed to the customer.

Prepare the entry to record the cash receipts from the customer.

Prepare the entry to record the construction costs incurred. Hint: Use Cash, payables, materials, etc.

Prepare the entry to record the amounts billed to the customer.

Prepare the entry to record the cash receipts from the customer.