1) Wind and Water Energy Company hired Smith Construction Corporation to build a new building for its operation. Smith agreed to build the plant for $1,200,000, and Wind and Water Energy agreed to pay Smith $300,000 on January 1 and July 1 for two years, beginning July, 2006. Smith estimates that it will incur total costs of $950,000 to complete construction. The following details at December 31, 2006:

Costs incurred to date $400,000

Estimated costs to complete 550,000

Billings to date 300,000

Collections to date 300,000

Required:

1. Calculated the amount of income that Smith should recognize for 2006, using the percentage-of-completion method.

2) Sad Construction Company use the percentage-of-completion method when total Construction can be estimated. Sad is building an office building for Porter Company for $10,000,000 with the following details:

12/31/2004 12/31/2005 12/31/2006

Costs incurred to date $2,000,000 $3,500,000 $6,500,000

Estimated costs to complete 6,000,000 4,500,000 1,500,000

Billing to date 6,000,000 8,000,000 10,000,000

Collections to date 3,000,000 5,500,000 10,000,000

Required:

1. Prepared all journal entries for 2004 that Sad should make for this job.

2. Prepared all journal entries for 2005 that Sad should make for this job.