E18-4B During 2007 AFCO started a construction job with a contract price of $2,500,000.

| January 30, 2017

Question
E18-4B (Recognition of Profit on Long-Term Contracts) During 2007 AFCO started a construction job with a contract price of $2,500,000. The job was completed in 2009. The following information is available.

2007 2008 2009

Costs incurred to date $ 600,000 $1,435,000 $2,100,000

Estimated costs to complete 1,400,000 615,000 –0–

Billings to date 100,000 500,000 2,500,000

Collections to date 100,000 300,000 2,000,000

Instructions

(a) Compute the amount of gross profit to be recognized each year assuming the percentage-of completion method is used.

(b) Prepare all necessary journal entries for 2008.

(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.

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