Question - Meyer Corporation uses the percentage-of-completion method to account for work performed under long-term construction contracts. Meyer began work under contract #7031-21, which provided for a contract price of $3,645,000. Additional data is as follows:
2007 2008
Costs incurred during the year 563,000 1,764,000
Estimated costs to complete, as of Dec 31 1,500,000 -0-
Billings during the year 580,000 2,875,000
Collections during the year 525,000 2,670,000
Instructions:
(a) What portion of the total contract price would be recognized as revenue in 2007 and in 2008?
(b) Prepare a complete set of journal entries for 2008 under the percentage-of-completion method?