Accounting for long-term Contracts

During 2016, Citation began construction of an office building for Altamont Corporation. The total contract price is $15 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows:

	2016	2017	2018
Cost incurred during the year	3,000,000	7,125,000	3,375,000
Estimated costs to complete as of year-end	9,000,000	3,375,000
Billings during the year	1,500,000	7,000,000	6,500,000
Cash collections during the year	1,350,000	6,050,000	7,600,000

Compute the amount of revenue and gross profit to be recognized each year, assuming the percentage-ofcompletion method is used.

(b) Prepare all necessary journal entries for 2018.

(c) Prepare a partial balance sheet for December 31, 2017.