P18-3 On March 1, 2014, Chance Company entered into a contract to build an apartment building.

| June 10, 2016

Question
On March 1, 2014, Chance Company entered into a contract to build an apartment building.

P18-3 (Recognition of Profit and Entries on Long-Term Contract) On March 1, 2014, Chance Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,000,000 and will take 3 years to complete. The contract price was $3,000,000 The following information pertains to the construction period.

2014

2015

2016

Costs to date:

$600,000

$1,560,000

$2,100,000

Estimated costs to complete:

1,400,000

520,000

0

Progress billing to date:

1,050,000

2,000,000

3,000,000

Cash collected to date:

950,000

1,950,000

2,850,000

Instructions

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

(b) Prepare all necessary journal entries for 2016.

(c) Prepare a partial balance sheet for December 31, 2015, showing the balances in the receivables and inventory accounts.

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