Meyer Corporation uses the percentage-of-completion method to account for work performed under long-term construction contracts. Meyer began work under contract #7031-21, which provided for a contract price of $3,600,000. Additional data is as follows:
2008 2009
Costs incurred during the year $ 500,000 $1,664,000
Estimated costs to complete, as of December 31 1,500,000 -0-
Billings during the year 580,000 2,875,000
Collections during the year 525,000 2,670,000
Instructions:
(a) What portion of the total contract price would be recognized as revenue in 2008 and in 2009?
*(b) Prepare a complete set of journal entries for 2008 under the (1) percentage-of-completion method, and (2) completed-contract method.