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Use the attached Word file to complete this problem.

  1. What theoretical justification is there for Vitaly Scherbo Company's use of the percentage-of-completion method?
  2. How would progress billings be accounted for? Include in your discussion the classification of progress billings in Vitaly Scherbo Company financial statements.
  3. How would the income recognized in the second year of the 4-year contract be determined using the cost-to-cost-method of determining percentage depletion?
  4. What would be the effect on earnings per share in the second year of the 4-year contract of using the percentage-of-completion method instead of the completed-contract method? Discuss.

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