10 10 Instructions (a) Compute the amount of gross profit to be recognized each year assuming the percentageof completion method is used. (b) Prepare all necessary journal entries for 2015. (c) Compute the amount of gross profit to be recognized each year, assuming the completed contract method is used. *E13-2ze {Analysis of Percentage-ofCompletion Financial Statements} In 2014, Landers Construction Corp. began construction work under a 5year contract. The contract price was $25,000,000. Landers uses the percentageofcompletion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2014, follow. Balance Sheet Accounts receivable $150,500 Construction in process $650,000 Less: Billings m Costs and recognized prot in excess of billings 390,000 Income statement Income (before tax) on the contract recognized in 2014 $130,000 Instructions (a) How much cash was collected in 2014 on this contract? (b) What was the initial estimated total income before tax on this contract? (AICPA adapted) *E10-28EI (Gross Prot on Uncompleted Contract} On July 1, 2014, Welton Inc. entered into a cost plus tixed fee contract to construct a prototype robotic assembly line for New Car Corporation. At the contract date. Welton estimated that it would take 2 years to complete the project at a cost of $4,000,000. The fixed fee stipulated in the contract is $750,000. Welton appropriately accounts for this contract under the percentageofcompletion method. During 2014 Welton incurred costs of $1,500,000 related to the project. The estimated cost at December 31, 2014, to complete the contract is $2,400,000. New Car was billed $1,200,000 under the contract. Instructions Prepare a schedule to compute the amount of gross prot to be recognized by Welton under the contract for the year ended December 31, 2014. Show supporting computations in good form. (AICPA adapted)