Revenue RecognitionFranken Stein Company began construction on a new scientific laboratory in 2016. The contract price is $6,500,000 and the lab will be completed mid-2018. The following is a year-by-year recap of construction costs incurred and the estimated costs to complete the project as of the end of each year. Progress billings and cash collections are also indicated. 2016 2017 2018Actual costs incurred during the year $1,600,000 $2,250,000 $1,800,000Estimated costs to complete 3,550,000 1,650,000 -0-Billings made during the year 1,400,000 3,200,000 1,900,000Cash collections during the year 1,000,000 2,650,000 2,850,000Instructions:1. Determine the amount of revenue to be recognized in each of the three years applying the long-term contract method. (round to nearest whole percent)2. Prepare the necessary journal entries for each of the three years to account for construction costs incurred, recognized revenue and cost of construction, contract billings, and cash collections.3. Prepare the necessary journal entry to close the construction accounts in 2018.
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