Requirement
Prepare the journal entries for each year to record the contract assuming that Gary uses the completed-contract method (show all supporting computations).
Complete the following table to compute gross profit for the year 2023.
2023
Revenue from long-term contracts
\$ 1,375,000
Costs of construction
900,000
Gross profit
\$ 475,000
Prepare the journal entries for the year 2022 to record the contract assuming that Gary uses the completed-contract method.
Begin by recording the construction costs in 2022.
Account
2022
Contract Information
Contract price
\$ 4,000,000
2022
2023
Actual construction costs incurred during the year
\$ 2,625,000 \$ 900,000
Construction costs incurred in prior years
0
2,625,000
Cumulative construction costs incurred to date
2,625,000
3,525,000
Estimated costs to complete
875,000
0
Estimated total costs
3,500,000
3,525,000
Progress billings made during the year
2,400,000
1,600,000
Cash collections during the year
2,000,000
2,000,000