Question
(Recognition of Profit on Long-Term Contracts) During 2014 AFCO started a construction job with a contract price of $2,500,000. The job was completed in 2016.
(Recognition of Profit on Long-Term Contracts) During 2014 AFCO started a construction job with a contract price of $2,500,000. The job was completed in 2016. The following information is available.
201420152016
Costs incurred to date$ 600,000$1,435,000$2,100,000
Estimated costs to complete1,400,000615,000-0-
Billings to date100,000500,0002,500,000
Collections to date100,000300,0002,000,000
Instructions
(a) Compute the amount of gross profit to be recognized each year assuming the percentage-ofcompletion method is used.
(b) Prepare all necessary journal entries for 2015.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.
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