Nance Network Consultants, Incorporated uses the percentage$-$of$-$completion method to account for its long$-$term contracts. It uses the cost$-$to$-$cost approach to measure progress. During the current year, Nance signed a contract to develop a computer network for an international accounting firm. Information related to the contract follows.

DELIVERABLES

A$.$ Compute the percentage$-$of$-$completion for each year.

B$.$ Compute the gross profit and revenue to be recognized each year of the contract.

C$.$ Prepare the journal entries required for each year of the contract.

D$.$ Prepare the t$-$accounts for construction in progress, billings on construction in progress, and accounts receivable.

E$.$ Determine the net asset $($liability$)$ for each year of the contract on December $31.$

 

Contract price $800,000 2022 2023 2024 Actual construction costs incurred during the year $200,000 $300,000 $150,000 Construction costs incurred in prior years 0 200,000 500,000 Cumulative construction costs incurred to date 200,000 500,000 650,000 Estimated costs to complete 400,000 300,000 0 Estimated total costs 600,000 800,000 650,000 Progress billings made during year 300,000 400,000 100,000 Cash collections during the year 220,000 380,000 200,000