Question 3

On March 1, 2015, Lancelot Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,200,000 and will take 3 years to complete. The contract price was $2,700,000. The following information pertains to the construction period:

2015

2016

2017

Annual Costs

$800,000

$1,100,000

$700,000

Estimated costs to complete

1,400,000

1,100,000

0

Yearly Progress billings

700,000

1,000,000

1,000,000

Yearly Cash collected

880,000

1,100,000

720,000

Required:(Round percentages toexcludedecimal points and round dollar amounts toexcludecents)

Assuming thepercentage-of-completionrevenue recognition method is used.

1. Compute the amount of revenue and gross profit to be recognized each year
2. Prepare the all necessary journal entries for each year.