Reference no: EM132556075

Inexperienced construction company Ayayai Corp. signed a risky non-cancellable contract to build a research facility at a fixed contract amount of $2,000,000. The work began in early 2020 and Ayayai incurred costs of $900,000. At December 31, 2020, the estimated future costs to complete the project totalled $900,000. During 2021, Ayayai ran into trouble with weather conditions and incurred the expected costs of $900,000 and estimated that it would need to spend an additional $300,000 to complete the project. During 2022, Ayayai reluctantly completed the project, incurring further costs of $350,000.

Question 1: Calculate the amount of gross profit or loss that should be recognized each year under the percentage-of-completion method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round percent complete to 2 decimal places, e.g. 15.25.)

Question 2: Prepare the December 31, 2021 year-end journal entry to record costs, revenues, expenses, and losses from the contract. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round percent complete to 2 decimal places, e.g. 15.25.)