Widjaja Compay is accounting for a long term construction contract using the percentage of completion method. It is a 4 year contract that is currently in its second year. The latest estimates of contact costs indicate that the contact will be completed at a profit to the company.

Based on this information please answer the following:

1 What theoretical justification is there or the Widjaja Company's use of the percentage-of-completion method

2 Discuss how the progress billings will be accounted for