Problem
On July 1, 2014, Stuffing Inc. entered into a contract to build the longest ever Thanksgiving table. It is estimated that the table will cost $6,000,000 and will take 3 years to complete. The contract price was $7,800,000. The following information pertains to the construction period.
2014 2015 2016
Costs to date $2,000,000 $4,060,000 $6,200,000 Estimated costs to complete $4,000,000 $1,740,000 -0- Progress billings to date $1,200,000 $4,800,000 $7,800,000 Cash collected to date $900,000 $4,200,000 $7,680,000
(a) Compute the amount of gross profit to be recognized each year, assuming the percentage-of completion method is used.
(b) Prepare all necessary journal entries for 2016.
(c) Prepare a partial balance sheet for December 31, 2015, showing the balances in the receivables and inventory accounts.