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Exercise 18-4 (E18-4) Recognition of Profit on Long-Term Contracts

Exercise 18-4 (E18-4) Recognition of Profit on Long-Term Contracts
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ACCOUNTING

ACC 421
Intermediate Financial Accounting I
Axia College of University of Phoenix (UoP)

Intermediate Accounting
Weygandt, Kieso, Warfield


Week Three (Week 3)

Exercise 18-4 (E18-4) (Recognition of Profit on Long-Term Contracts) During 2007 Pierson Company started a construction job with a contract price of $1,500,000. The job was completed in 2009. The following information is available.

2007 2008 2009
Costs incurred to date $400,000 $935,000 $1,070,000
Estimated costs to complete 600,000 165,000 –0–
Billings to date 300,000 900,000 1,500,000
Collections to date 270,000 810,000 1,425,000

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.

 

FILE: MS WORD

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