(Recognition of Profit and Entries on Long-Term Contract) On March 1, 2007, Winter 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-ofcompletion method is used.

(b) Prepare all necessary journal entries for 2009.

(c) Prepare a partial balance sheet for December 31, 2008, showing the balances in the receivables and inventory accounts.

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2007 2008 2009 Costs to date $ 600,000 $1,560,000 $2,100,000 Estimated costs to complete Progress billings to date 1,400,000 390,000 -0- 1,050,000 2,100,000 3,000,000 Cash collected to date 950,000 1,950,000 2,750,000