At the beginning of 2017 Premier Yachts enters into a contract to build a luxury yacht for a customer that is expected to take three years to complete. The contract price is $12,000,000. Completion is scheduled for the end of 2019. Premier's year end is December 31. The following is a year by year summary of construction costs incurred and the estimated costs to complete the projects at the end

of each year.

2017
2018
2019
Actual costs incurred current year
$2,250,000
$6,750,000
$2,325,000
Actual costs incurred prior years
-0-
2,250,000
9,000,000
Cumulative actual costs incurred to date
2,250,000
9,000,000
11,325,000
Estimated costs to complete end of year
6,750,000
2,250,000
-0-
Total Costs
$9,000,000
$11,250,000
$11,325,000
Billings
$2,100,000
$7,800,000
$2,100,000
Cash Collections
1,500,000
6,000,000
4,500,000

Required: Prepare the entries under the completed-contract method for 2017

What will be an ideal response?

Answer:
2017

Construction in Progress
2,250,000

Cash or A/P

2,250,000

Accounts Receivable
2,100,000

Billings on Construction

2,100,000

Cash
1,500,000

Accounts Receivable

1,500,000

Cost of Construction
750,000

Revenue

750,000