Recognition of Profit and Entries on Long-Term Contract On March 1, 2010, 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.

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 2012.

(c) Prepare a partial balance sheet for December 31, 2011, showing the balances in the receivables and inventoryaccounts.

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2012 2011 2010 Costs to date Estimated costs to complete Progress billings to date Cash collected to date $1,560,000 $2,100,000 1,400,000 1,050,000 -0- 3,000,000 2,000,000 1,950,000 2,850,000 950,000