Gary Construction Associates accepted a contract to build an office building on January 2, 2022. The company will complete the contract within two years. Gary provided the following information related to the revenue, estimated costs, progress billings, and collections over the two year period.

Prepare the journal entries for each year to record the contract, assuming that Gary uses the percentage-of completion method with the cost-to-cost approach to measure progress. Show all supporting computations.

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Contract price Actual construction costs incurred during the year Construction costs incurred in prior years Cumulative construction costs incurred to date Estimated costs to complete Estimated total costs Progress billings made during the year Cash collections during the year $4,000,000 2022 $ 2,625,000 0 2,625,000 875,000 2023 $ 900,000 2,625,000 3,525,000 0 3,500,000 3,525,000 2,400,000 1,600,000 2,000,000 2,000,000