Solve this accounting problem for the ABC grocery company relating to revenue and expense recognition as per GAAP: ABC Corporation uses the percentage-of-completion method of accounting. In 2010, ABC entered into a contract for a contract price of $2,000,000.
2010
Costs incurred during the year
600,000
Estimated costs to complete as of Dec 31
900,000
Billings during the year
400,000
Collections during the year
300,000
1. What portion of the total contract price is recognized as revenue in 2010?
2. What is the profit recognized for 2010?
3. Prepare the journal entries for 2010 under the percentage completion method.