The Power Construction Company was the low bidder on a specialized equipment contract. The contract bid was $6,000,000 with an estimated cost to complete the project of $5,300,000. The contract period was 33 months, beginning January 1, 2007. The company uses the cost-to-cost method to estimate profits. A record of construction activities for the years 2007–2010 follows:

The estimated cost to complete the contract at the end of each accounting period is:
2007 ........$2,100,000
2008 ........ 150,000
2009 ........ 0
Instructions:
1. What are the revenue, cost, and gross profit recognized for each of the years 2007–2009 under the percentage-of-completion method?
2. Give the journal entries for each of the years 2007–2009 to record the information from (1).
3. Give the journal entries in 2010 to record any collections and to close out all constructionaccounts.

Transcribed Image Text:

Actual Cost Progress Cash Current Year Blings Receipts $3.200.000 $3.000,000 2000,000 2.000.000 Year 2007. 2008.. 2009 2010 $3.400,000 2,550,000 200,000 600.000 400,000 800,000