Recognition of Profit and Entries on Long Term Contract On March 1, 2010, Chance Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,000,000 and will take 3 years to complete. The contract price was $3,000,000. The following information pertains to the construction period.
Instructions
(a) Compute the amount of gross profit to be recognized each year assuming the percentage of completion method is used.
(b) Prepare all necessary journal entries for 2012.
(c) Prepare a partial balance sheet for December 31, 2011, showing the balances in the receivables and inventoryaccounts.