The Kirby Construction Company was the low bidder on a specialized equipment contract. The contract bid was $5,400,000 with an estimated cost to complete the project of $4,800,000. The contract period was 34 months, beginning March 1, 2012. The company uses the cost-to-cost method to estimate profits.

A record of construction activities for the years 2012-2015 follows:

The estimated cost to complete the contract at the end of each accounting period is:
2012...................... $2,200,000
2013......................... 500,000
2014................................. 0
Instructions:
1. What are the revenue, cost, and gross profit recognized for each of the years 2012-2014 under the percentage-of-completion method?
2. Give the journal entries for each of the years 2012-2014 to record the information from (1).
3. Give the journal entries in 2015 to record any collections and to close out all construction accounts.

Transcribed Image Text:

Actual CostProgress Billings Cash Receipts Current Year $2,800,000 2,200,000 00,x) 0 $2,600,000 $2,200,000 1,900,000 700,000 600,000 ,10,00 700,000 0