Norman Industries uses the percentage of completion method of accounting for construction contracts. In 2011 Norman Industries entered into a contract to build a commercial building with a contract price of $6,000,000 for Jones Ltd. The details relating to the contract are as follows:
2011 2012 2013
$ $ $
Costs incurred during the year 700,000 2,500,000 3,000,000
Estimated costs to complete at 30 June 4,600,000 3,000,000 0
Billings during the year 1,440,000 2,500,000 2,060,000
Collections during the year 1,000,000 2,400,000 2,000,000
Norman Industries has a financial year ends on 30 June.
Required:
(a) Calculate the amount of profit to be recognised by Norman Industries for the three years.
(b) Prepare the general journal entries for all three years, assuming the outcome of the contract can be reliably estimated.
Note: round all figures to the nearest dollar, and leave all percentages with two decimal places.