Question - Recognition of Profit on Long-Term Contracts
During 2010 Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2012. The following information is available.
2010 2011 2012
Costs incurred to date $400,000 $825,000 $1,070,000
Estimated costs to complete 600,000 275,000 -0-
Billings to date 300,000 900,000 1,600,000
Collections to date 270,000 810,000 1,425,000
Instructions -
Compute the amount of gross profit to be recognized each year assuming the percentage-of-completion method is used.
Prepare all necessary journal entries for 2011.
Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.