Macro Tech enters a contract on January 1, 2019 to produce software for a customer for $5,000,000. Macro Tech receives $2,000,000 from the customer upon contract signing and the balance at the completion of the contract. According to the contract, the customer controls the system during the creation of the program. Macro Tech estimates that it will take two years to complete the project and uses the number of labor hours to estimate the rate of completion. Macro Tech spends 30,000 hours in the first year of the contract and another 20,000 hours the second year.
Required:
Prepare the entries recorded by Macro Tech over the life of this contract. Assume that all payments are complete by the end of 2020.

Question

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The Answer of Macro Tech enters a contract on January 1, 2019 to produce software for a customer for $5,000,000. Macro Tech receives $2,000,000 from the customer upon contract signing and the balance at the completion of the contract. According to the contract, the customer controls the system during the creation of the program. Macro Tech estimates that it will take two years to complete the project and uses the number of labor hours to estimate the rate of completion. Macro Tech spends 30,000 hours in the first year of the contract and another 20,000 hours the second year.
Required:
Prepare the entries recorded by Macro Tech over the life of this contract. Assume that all payments are complete by the end of 2020.

Macro Tech Enters a Contract on January 1, 2019 to Produce