Exercise 18-33 (Recognition of Profit on Long-Term Contracts) During 2022, Nelson Company started a construction job with a contract price of $1,600,000. The job was completed in 2024. The following information is available: Contract cost incurred to date Estimated costs to complete Billings to date Collections to date Instructions: 2022 $400,000 600,000 300,000 270,000 2024 2023 $825,000 $1,070,000 275,000 900,000 810,000 1,600,000 1,425,000 (a) Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. 0 (b) Prepare all necessary journal entries for 2023. (c) Compute the amount of gross profit to be recognized each year, assuming the cost- recovery method is used.

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Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.