Part A. Living Legend Construction Company uses the percentage-of-completion method of accounting. In 2010, Living Legend began work under contract #11/1, which provided for a contract price of $2,200,000. Other details follow:
2010 2011
Costs incurred during the year $640,000 $1,425,000
Estimated costs to complete, as of Dec. 31 960,000 -0-
Billings during the year 420,000 1,680,000
Collections during the year 350,000 1,500,000
1) What percentage of the total contract price would be recognized as revenue in 2010? In 2011? Show calculations.
2) Assuming the same facts as above except that Living Legend used the completed contract method, what amount of the total contract price would be recognized as revenue in 2011?
3) Prepare a complete set of journal entries for 2010 using the percentage-of- completion method.