Vaughn Enterprises Ltd. has entered into a contract beginning in February 2023 to build two warehouses for Atlantis Structures Ltd. The contract is a non-cancellable
fixed-price contract for $10 million. The following data pertain to the construction period (all figures in thousands).

2023 2024 2025
Costs for the year $3,825 $4,675 $1,200
Estimated costs to complete 4,675 1,270 –0–
Progress billings for the year (non-refundable)
3,500 4,100 2,400
Cash collected for the year 3,100 4,150 2,750

Instructions

a. Using the percentage-of-completion method, calculate the percentage complete for each year of the
contract. Round the percentage completion to the nearest whole percentage point.

b. Calculate the amount of the gross profit to be recognized each year of the contract.

c. Prepare the journal entries for 2023 and 2024.

d. What is the balance in the Contract Asset/Liability account at December 31, 2023 and 2024? e. Show how the construction contract would be reported on the SFP and the income statement for the
year ended December 31, 2024.