Sample Contractor WIP answer key

All data is fictional. CY = current year. PY = prior year.

Completed current-year WIP:
Inception-to-date revenue: $2,060,000
Inception-to-date costs: $1,652,500
Inception-to-date billings: $2,085,000
Prior cumulative revenue: $620,000
Prior cumulative costs: $504,500
Prior cumulative billings: $620,000
Current-year earned revenue: $1,440,000
Current-year job costs: $1,148,000
Current-year gross profit: $292,000
Required ending Underbillings: $60,000
Required ending Overbillings: $85,000

AJE dated 5/31/20CY, starting from existing $20,000 debit Underbillings and $20,000 credit Overbillings:
Debit Underbillings $40,000
Debit Revenue - WIP adj. $25,000
Credit Overbillings $65,000

Adjusted P&L:
Contract billings $1,465,000 less WIP revenue adjustment $25,000 = earned revenue $1,440,000
Job costs $1,148,000
Gross profit $292,000
Administrative expenses $192,500
Net income $99,500

Balance sheets balance at $420,000 at 12/31/20PY, $555,000 before the current-year WIP AJE, and $595,000 after it.

Use the current general-ledger balances as the starting point, regardless of when they were booked. Adjust only the difference to the required ending WIP balances. WIP entries should not be reversed. Different actual book balances require a different entry.

Files 08 and 09 preserve formulas so you can inspect the calculations. File 08 contains the Levvigo WIP plus its filtered in-progress and completed schedules. File 09 shows the full eight-job calculation and the journal entry/reconciliation.
