(Answered) Question - recognition of profit on long-term contracts

Accounting

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.

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