In January 2024, the City of Victoria entered into a contract with LightRail Canada Ltd. (“LRCL”) to construct a rapid transit line in the city. The contract, which was being funded by the City of Victoria, the Province of BC, and the Government of Canada, was for $98,200,000 and was part of the City’s master transportation strategy. LRCL estimated that it would take three years to complete the project. LRCL is a public company and has a December 31 year end. The company uses the percentage-of-completion method, with completion measured as the ratio of costs incurred to date to the total estimated construction costs. LRCL had the following information available in relation to this construction contract:

Required 

a. Determine the percentage of completion, revenue, and gross profit to be recognized for each year of the contract. 

b. Prepare all necessary journal entries for each year of the contract.

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Costs incurred during the year Total costs incurred to date Estimated costs to complete Estimated total project cost Progress billings during the year Cash collected during the year 2024 $29,721,600 29,721,600 52,838,400 82,560,000 30,000,000 27,000,000 2025 $39,412,600 69,134,200 15,175,800 84,310,000 45,000,000 41,000,000 2026 $14,605,800 83,740,000 83,740,000 23,200,000 30,200,000