On July 1, 2016, Jemez Company entered into a contract to build an apartment building. It is estimated that the building will take 3 years to complete. The contract price was $7,800,000. The following information pertains to the construction period.

2016 2017 2018

Costs to date $2,000,000 $4,060,000 6,200,000

Estimated costs to complete 4,000,000 1,740,000 0

Progress billings to date 1,200,000 4,800,000 7,800,000

Cash collected to date 900,000 4,200,000 7,680,000

Compute the amount of revenue and gross profit to be recognized each year, assuming the percentage-of completion method is used.

	2016	2017	2018
Contract price
Percentage completed to date	X__ _	X _____	X ___
Revenue recognized to date
Less: revenue recognized in previous years
Revenue recognized in current year

	2016		2017		2018
Contract price
Costs:
Costs to date
Estimated costs to complete
Total est. costs
Total estimated profit
Percentage completed to date		X ___		X __		X ___
Gross profit recognized to date
Less: Gross profit recognized in previous years
Gross profit recognized in current year

(b) Prepare all necessary journal entries for 2018.

(c) Prepare a partial balance sheet for December 31, 2017.

Problem 8 Accounting for long-term Contracts

Same information as in Problem 7 except that the estimated cost to complete at the end of 2017 was $3,840,000 instead of $1,740,000.

Compute the amount of revenue and gross profit to be recognized in 2017, assuming the percentage-of-completion method is used.

Prepare the journal entry to recognize revenue in 2017 under the percentage-of-completion method.

Prepare a partial balance sheet for 12/31/2017, assuming the percentage-of-completion method is used.

If Jemez used the completed contract method, what would be the amount of revenue and gross profit to be recognized in 2017? Prepare the journal entry to recognize revenue.