Exercise NO: 12

During 2014, Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2016. The following information i

During 2014, Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2016. The following information is available.

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2014 2015 2016

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Costs incurred to date $400,000 $825,000 $1,070,000

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Estimated costs to complete 600,000 275,000 –0–

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Billings to date 300,000 900,000 1,600,000

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Collections to date 270,000 810,000 1,425,000

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Instructions

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

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(b) Prepare all necessary journal entries for 2015.

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

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