Sanshain Construction Company has entered into a contract beginning January 1, 2019, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.

Items 2019 2020 2021
Costs incurred to date $270,000 $450,000 $610,000
Estimated costs to complete 330,000 150,000 –0–
Billings to date 270,000 550,000 900,000
Collections to date 240,000 500,000 900,000

Instructions

  1. Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.
  2. Record the necessary journal entry each year.
  3. Prepare the partial income statement and statement of financial position for all periods (2019, 2020 and 2021)
  4. Using the cost-recovery method, compute the estimated gross profit that would be recognized during each year of the construction period.

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