In 2020, Dixon Construction Company was awarded a contract to construct an interchange on Highway 30 at a total contract price of $15,000,000. Construction is expected to take two years to complete. The estimated total costs of the project are $12,000,000. Dixon uses the percentage-of-completion method to account for long-term contracts. During the first year cost of construction totaled $7,200,000 and the total estimated costs for the project are unchanged.

a) Prepare the entry to record 2020 construction costs of $7,200,000 paid in cash.

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b) Prepare the entry to record the 2020 progress billings of $4,000,000 to the customer.

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c) Prepare the entry to record the $3,500,000 payments on the contract received during 2020.

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d) Prepare the necessary year-end entry to recognize the profit to date.

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e) What is the amount of gross profit that will appear on the income statement? blank

Choices:

1,800,000

3,500,000

4,000,000

7,200,000

7,200,000

9,000,000

Cash

Accounts Receivable

Construction Revenue

Billings on contracts

Construction Expense