On June 15, 2007, AB Construction Company signed a $180,000 contract to build a small structure for XY Company. AB estimated that total cost to construct would be $160,000. Construction started immediately because the required completion date was August 31, 2008. AB's relevant data relating to this construction project were as follows:

\begin{array}{|l|l|l|l|}\hline & 2007 & 2008 & \text { Total } \\\hline \text { Contract price } & & & \$ 180,000 \\\hline \text { Actual cost incurred by year } & \$ 60,000 & \$ 102,000 & \\\hline \text { Estimated costs to complete } & 100,000 & -0- & \\\hline \text { Progress billings (to XY) by year } & 56,000 & 124,000 & \\\hline \text { Collections (XY) cash by year } & 55,000 & 125,000 & \\\hline\end{array}

Required:

1. How much income should AB recognize each year, assuming:

\begin{array} { | l | l | l | } \hline \text { Method Used } & \text { For 2007 } & \text { For 2008 } \\\hline \text { (a) Completed contract } & \$ & \$ \\\hline \text { (b) Percentage-of-completion } & \$ & \$ \\\hline\end{array}

2. What amounts should AB report on the balance sheet at the end of each year for:

\begin{array} { | l | l | l | } \hline \text { (a) Accounts (billings) receivable assuming: } & 12 / 31 / 2007 & 12 / 31 / 2008 \\\hline \text { Completed contract method } & \$ & \$ \\\hline \text { Percentage-of-completion method } & \$ & \$ \\\hline \text { (b) Construction in process, assuming: } & 12 / 31 / 2007 & 12 / 31 / 2008 \\\hline \text { Completed contract method } & \$ & \$ \\\hline \text { Percentage completion method } & \$ & \$ \\\hline\end{array}

3. Give the entry to record income for 2007, assuming the percentage-of-completion method is used.

\begin{array} { | l | l | l | } \hline \text { Construction in process inventory } & \$ 60,000 & - 0 - \\\hline \text { Less: Billings on contracts } & 56,000 & - 0 - \\\hline \text { Cost in excess of billings } & \$ 4,000 & - 0 - \\\hline\end{array}

The Percentage-Of-Completion Method of Accounting for Long-Term Construction Projects Is

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