b. Assuming use of the Percentage-of-Completion method, prepare the adjusting journal entries that would be recorded at 12-31-YR07 and 12-31-YR08. Assume the company will estimate contract progress based on costs

21. Builder Inc., a general contractor, signed a contract on October 10, YR07 to construct a new building for Purchaser Co. All construction activity will be completed by subcontractors who are hired and supervised by Builder Inc. Terms of the contract are as follows: 1. The base contract price is $2,500 2. If the project is completed by May 1, YRO8 the contract price will be increased by a bonus of $200. 3. If the project is delay beyond August 1, YR08 the contract price will be reduced by a penalty of $300. The year-end for Builder Inc. is December 31. Accounting policies for Builder Inc. require that all adjusting entries be made once a year, at December 31. Key events related to this contract are provided below. Date Description of Transaction 11-1-YRO7 Paid subcontractors $500. 11-15-YRO7 Billed Purchaser Co. $1,200. 11-30-YRO7 Received a payment of $900 from Purchaser Co. 12-1-YRO7 Paid subcontractors $700. 12-31-YRO7 Estimated the contract would take another $800 to be completed and that the completion date would be July 1, YRO8. Made all necessary adjusting journal entries. 2-10-YROS 3-25-YROS Paid subcontractors $600. Determined that the project would be completed on April 1, YR08 and billed Purchaser Co. for the balance of the contract price. Completed the project and made final payment to subcontractors for $200. Received a payment of $1,000 from Purchaser Co. Made all necessary adjusting journal entries. 4-1-YROS 6-1-YROS 12-31-YROS REQUIRED: 21. Builder Inc., a general contractor, signed a contract on October 10, YR07 to construct a new building for Purchaser Co. All construction activity will be completed by subcontractors who are hired and supervised by Builder Inc. Terms of the contract are as follows: 1. The base contract price is $2,500 2. If the project is completed by May 1, YRO8 the contract price will be increased by a bonus of $200. 3. If the project is delay beyond August 1, YR08 the contract price will be reduced by a penalty of $300. The year-end for Builder Inc. is December 31. Accounting policies for Builder Inc. require that all adjusting entries be made once a year, at December 31. Key events related to this contract are provided below. Date Description of Transaction 11-1-YRO7 Paid subcontractors $500. 11-15-YRO7 Billed Purchaser Co. $1,200. 11-30-YRO7 Received a payment of $900 from Purchaser Co. 12-1-YRO7 Paid subcontractors $700. 12-31-YRO7 Estimated the contract would take another $800 to be completed and that the completion date would be July 1, YRO8. Made all necessary adjusting journal entries. 2-10-YROS 3-25-YROS Paid subcontractors $600. Determined that the project would be completed on April 1, YR08 and billed Purchaser Co. for the balance of the contract price. Completed the project and made final payment to subcontractors for $200. Received a payment of $1,000 from Purchaser Co. Made all necessary adjusting journal entries. 4-1-YROS 6-1-YROS 12-31-YROS REQUIRED