Long- Term Construction

On January 1, 2021, ABC enters into a contract to construct a building for a customer. ABC identifies its performance obligation to satisfied over time. ABC uses the input method based on costs to measure its progress on the contract. The contract price is P9M

Information on the construction is provided below:

2021 2022 2023

a. Contract cost incurred per year 2,760,000 3,540,000 500,000

b. Billing per year 50% 30% 20%

c. Collections on billings per year 90% 90% balance

d. Estimated costs to complete (at each yr. end) 4,140,000 700,000

Note:

• Billings per year are stated as percentages of the contract price. The contract is non-cancellable.
• The collection on billings in 2021 and 2022 are net of 10% retention. "Retention" is an amount withheld by the contracted and payable to the contractor at the end of the contract when the project is completed and accepted.

Requirements;

a. Compute for the gross profits, revenue and costs of construction in 2021, 2022 and 2023, respectively.

b. Provide the journal entries

c. Determined the amounts presented in the financial statements.