# Comprehension Quiz: Revenue Recognition- ACCOUNTING

Wermer, Inc. began a construction project in 2020.  The project is accounted for under the percentage of completion method.  The total price of the job is \$50 million.  The following information (in million dollars) applies:

2020                       2021

i) Calculate Wermer’s percentage-of completion for 2020, and write the journal entry that records 2020 revenue for this project.

Percentage of completion:  20/35=57%

2016 Journal entry:

Cost of construction (or COGS)                                   20

Construction in Progress (CIP)                                     8.5 (plug for gross profit)

Revenue (57%*50)                                                                           28.5

## (Check:  2016 gross profit = 57%*(50-35) = \$8.5 million)

ii) Calculate Wermer’s percentage-of completion for 2021, and write the journal entry that records 2021 revenue for this project.

Percentage of completion:  30/40=75%

2017 Journal entry:

Cost of construction (or COGS)                                   10

Construction in Progress (CIP)                                                     1  (plug for loss)

Revenue (75%*50-28.5)                                                                9