Part 2

1. Discuss the revenue principle and the matching principle as per the generally accepted accounting principles (GAAP).
2. Contrast the percentage-of-completion method of revenue recognition versus the completed contract method.
3. Solve this accounting problem for the ABC grocery company relating to revenue and expense recognition as per GAAP: ABC Corporation uses the percentage-of-completion method of accounting. In 2010, ABC entered into a contract for a contract price of $2,000,000.
   

   	2010
   Costs incurred during the year	600,000
   Estimated costs to complete as of Dec 31	900,000
   Billings during the year	400,000
   Collections during the year	300,000

   • What portion of the total contract price is recognized as revenue in 2010?
   • What is the profit recognized for 2010?
   • Prepare the journal entries for 2010 under the percentage completion method