Problem #$2$

Sauron$$s Towers Company constructs office buildings. Because they can reasonably estimate the costs

to completion, they use the percentage of completion method to record revenue. At the beginning of

$2030,$ they began construction on an office building in downtown Portland that will take them three

years to complete. The contract was for $$48,500,000.$

$202920302031$

Costs incurred to date $33,750,00037,100,00044,000,000$

Estimated costs to complete $8,750,0006,400,000-0-$

Billings to date $12,700,00029,200,00045,500,000$

Collections to date $10,600,00026,400,00043,600,000$

A$.$ In a spreadsheet, please show all the journal entries to record the activities for all three years.

B$.$ Please show the balance of the construction in progress and billings on construction in progress

for each of the three years. Will they be reported as a net current asset or current liability

recorded on the balance sheet for each year?

C$.$ Please briefly describe in paragraph form how your journal entries would change for all three

years if Sauron$$s Towers Company used the cost$-$recovery method instead of the percentage of

completion method.