In December 2021, Jordan Inc and Otter-Manufacturing signed a 3 year contract for Jordon to update Otter’s computer networks starting in 2022. The contract calls for annual payments of $20,000 due on January 1 of each year, with the first payment due on 1/1/22. The implicit rate of interest used by Jordon in pricing this contract was 8%. Is a journal entry required for 2021? If so, how would it be done? If journal entry is required then show in proper format.

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Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.