The Kurtz Construction Corporation contracted with the City of Port Huron to construct a dam on the Erie River at a price of  \($16.000.000.\) Kurtz expects to earn \($1,520.000\) on the contract. The percentage-of-completion method is to be used, and the completion stage is to be determined by estimates made by the engineer The following schedule summarizes the activities of the contract for the years 2001-2003.

Instructions:
1. Prepare a schedule showing the revenue, cost, and the gross profit earned each year under the percentage-of-completion method, using the engineers estimate as the measure of completion to be applied to revenues and costs.
2. Prepare all journal entries required to reflect the contract.
3. Prepare journal entries for 2003. assuming the completed-contract method is used.
4. How would the journal entries in (2) differ if the actual costs incurred were used to calculate cost for the period instead of the engineer's estimate?

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Year 2001 2002 2003 Cost Incurred $4,600,000 4,500,000 5,250,000 Engineer's Estimated Estimate of Cost to Complete Completion $9,640,000 31% 5,100,000 58 0 100 Billings on Contract $5,000,000 Collection on Billings $4,500,000 5,400,000 6,000,000 5,000,000 6,100,000