Creators Ltd. is constructing a residential highrise in downtown Vancouver for a contract price of $13,000,000. Costs for this contract were initially estimated to be $10,000,000. The company uses the percentage of completion method of revenuerecognition, using thecost-to-cost method of estimating the percentage complete. The following information isavailable:(in $ thousands)

Year 1

Year 2

Year 3

Costs incurred each year

$

2,500

$

8,500

$

2,000

Additional costs to complete estimated at year end

7,500

5,000

0

Billings on construction in progress

6,000

6,000

1,000

Cash collected

4,800

7,000

1,200

a.

Compute the amount of gross profit to be recognized in each year. Show computations in good form.

b.

Compute the amount of revenue to be recognized in Year 2.

c.

Prepare the journal entries required in Year 2. [Hint: four entries arerequired.]

d.

Prepare the journal entry required in Year 3 to acknowledge completion and acceptance of the project.

(Enter all amounts inthousands.)