Business at PPP has been booming and in 2015 they entered into a contract with CC to have CC construct a new

factory building for them so that they can meet the unexpectedly high demand for these dolls.

PPP agreed to pay

$24,000,000 for the construction of its new factory.

The contract between CC and PPP qualifies for CC to use the

percentage-of-completion method to recognize revenue over the life of the project.

At the time the contract was

signed in 2015 the CC estimated that its cost to complete the contract would be as follows:

2015

2016

2017

2018

Total

8,000,00

5,000,00

4,000,00

3,000,00

20,000,00

Estimated Costs

0

0

0

0

0

These figures were used to estimate both revenues and gross profit for 2015.

During the year in 2016 CC ran into

some zoning issues and was forced to incur an additional 2,500,000 above and beyond the 5,000,000 that was

initially budgeted for.

There were no other changes to the estimated costs for the calculation of 2016 revenue and

gross profit.

Bad luck struck again in 2017 as the cost of materials needed to finish the project went up and CC

revised its costs for 2017 and 2018 to 5,000,000 and 4,000,000 respectively.

Part IV

Required:

Provide the adjusting journal entry that CC would make at the end of each of the years 2015, 2016,

2017 and 2018 to account for the revenues, expenses and gross profit on this project.

(Hint: you do not need to

worry about billings, cash collections or closing out the billings and CIP accounts, just record the revenue,

expense and gross profit for each year)