Condo King (CK) is building a luxury condominium for a contract price of $60,000,000. This is estimated to be a three-year project with an estimated cost of $48,000,000. CK uses the percentage-of-completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following is the best available information at the end of each year:

Required:
a. Compute the amount of gross profit to be recognized in Year 1, Year 2, and Year 3. Show computations in tabular form in a spreadsheet.
b. Prepare all the journal entries required in Year 2.
c. Prepare the journal entry required in Year 3 to close the accounts related to the project.
d. At the end of Year 2, if the estimated cost to complete is $22 million (instead of $18 million), how much gross profit would be recognized in Year 2?

(in S thousands) Costs incurred each year Estimated costs to complete Billings on construction in progress Cash collected Year 2 S13,000 $27,000 $14,000 18,000 25,000 20,000 Year I Year 3 37,000 15,000 8,000 20,000 32,000