Acc421 Intermediate Accounting: E18-4B During 2007 AFCO started a construction job with a contract

Acc421 Intermediate Accounting

E18-4B (Recognition of Profit on Long-Term Contracts)
During 2007 AFCO started a construction job with a contract price of $2,500,000. The job was completed in 2009. The following information is available.
2007 2008 2009
Costs incurred to date 600,000 1,435,000 2,100,000
Estimated costs to complete 1,400,000 615,000 -
Billings to date 100,000 500,000 2,500,000
Collections to date 100,000 300,000 2,000,000

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 2008.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.
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