Beavis Construction Company was the low bidder on a construction project to build an office building for $8,000,000. The project was begun in 2017 and completed in 2019. Cost and other data are presented below:

2017 2018 2019

Costs incurred during the year $ 1,500,000 $4,500,000 $1,550,000

Estimated costs to complete 4,500,000 1,500,000 -0-

Billings during the year 1,400,000 5,200,000 1,400,000

Cash collections during the year 1,000,000 4,000,000 3,000,000

Assume that Beavis recognizes revenue on this contract over time according to percentage of completion. Also assume that all construction costs are paid in Cash.

Required:

Compute the amount of revenue and gross profit recognized during 2017 and 2018.

Extra credit (9 points):

Prepare the 2018 journal entries to record:

a. Construction costs incurred during the year

b. Billings

c. Cash Collections

d. Revenue Recognition