(Recognition of Profit on Long Term Contracts) During 2012, Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2014. The following information is available.
|
2012 |
2013 |
2014 |
|
|
Costs incurred to date |
$400,000 |
$825,000 |
$1,070,000 |
|
Estimated costs to complete |
600,000 |
275,000 |
–0– |
|
Billings to date |
300,000 |
900,000 |
1,600,000 |
|
Collections to date |
270,000 |
810,000 |
1,425,000 |
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 2013.
(c) Compute the amount of gross profit to be recognized each year, assuming the completed contract method is used.