The Kirby Construction Company was the low bidder on a specialized equipment contract. The contract bid was $5,400,000 with an estimated cost to complete the project of $4,800,000. The contract period was 34 months, beginning March 1, 2010. The company uses the cost-to-cost method to estimate profits. A record of construction activities for the years 2010–2013 follows:

The estimated cost to complete the contract at the end of each accounting period is:
2010 $2,200,000
2011 500,000
2012 0

Instructions:
1. What are the revenue, cost, and gross profit recognized for each of the years 2010–2012 under the percentage-of-completion method?
2. Give the journal entries for each of the years 2010–2012 to record the information from (1).
3. Give the journal entries in 2013 to record any collections and to close out all constructionaccounts.

Transcribed Image Text:

Actual Cost- Current Year Progress Billings Receipts $2,200,000 700,000 Year 2010 2011 2012 2013 $2.800,000 2,200,000 $2.600,000 2.100,000 700,000 600,000 600,000