Question - In 2014, Robben Contractors began construction on an office building. The building was expected to cost $45,700,000 in total, and was expected to be completed in early 2016. The customer was to pay Robben $49,900,000 for the building. Robben was able to use percentage-of-completion accounting for the project, and at the end of 2014 had accumulated $12,796,000 in cost.
During 2015, there was a lumber shortage, a strike by construction workers, and various other incidents that dramatically raised costs in the construction industry. As a result, at the end of 2015, Robben estimated that the office building would cost an additional $5,900,000 more than originally estimated. To the end of 2015, Robben had spent $41,280,000 on constructing the office building.
Calculate the revenue to be recognized by Robben for the 2015 fiscal year.
Prepare the journal entry to record revenue, construction expenses, and construction in process.