Recognition of Revenue on Long-Term Contract and Entries

Recognition of Revenue on Long-Term Contract and Entries
Amy Van Dyken Construction
Company uses the percentage-of-completion method of accounting. In 2007, Van Dyken began work under
contract #E2-D2, which provided for a contract price of $2,200,000. Other details follow:
2007 2008
Costs incurred during the year $ 480,000 $1,425,000
Estimated costs to complete, as of December 31 1,120,000 -0-
Billings during the year 420,000 1,680,000
Collections during the year 350,000 1,500,000

Instructions
(a) What portion of the total contract price would be recognized as revenue in 2007? In 2008?
(b) Assuming the same facts as those above except that Van Dyken uses the completed-contract
method of accounting, what portion of the total contract price would be recognized as revenue
in 2008?
(c) Prepare a complete set of journal entries for 2007 (using the percentage-of-completion method).

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