Wayne Computer Consultants, Incorporated develops and installs integrated computer systems and networks for large utilities. On January 2, 2022, the company signed a contract to deliver an electricity deployment system for a grid covering three New England states. The contract paid R. Wayne a fixed fee of $18,000,000. Wayne Computer Consultants uses the percentage-of-completion method (cost-to-cost approach) to report its long-term contracts. Other relevant information related to the contract is presented in the following table.

Required

a. Compute the gross profit and revenue to be recognized each year of the contract.

b. Prepare the journal entries required for each year of the contract.

c. Prepare the t-accounts for construction in progress, billings on construction in progress, and accounts receivable.

d. Determine the net asset (liability) for each year of the contract on December 31.

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Contract price Actual construction costs incurred during the year Construction costs incurred in prior years Estimated costs to complete Estimated total costs Progress billings made during the year Cash collections during the year $18,000,000 2022 $ 4,500,000 0 $10,500,000 $15,000,000 $ 6,600,000 $ 6,000,000 2023 $ 6,000,000 $ 4,500,000 $ 2,625,000 $13,125,000 $ 8,400,000 $ 6,000,000 2024 $ 5,000,000 $10,500,000 0 $15,500,000 $ 3,000,000 $ 6,000,000