Long-term Contracts Koolman Construction Company began work on a contract in 2017. The contract...

Question:

Long-term Contracts Koolman Construction Company began work on a contract in 2017. The contract price is $3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows:

2017 2018
Costs incurred during the year $ 600,000 $ 700,000
Estimated costs to complete, December 31 1,400,000 1,200,000
Billings during the year 500,000 850,000
Collections during the year 400,000 800,000

Required: 1. Compute the gross profit or loss recognized in 2017 and 2018.

2. Prepare the appropriate sections of the income statement for each year

3. Prepare the appropriate sections of the ending balance sheet for the year 2017.

4. Prepare the appropriate sections of the ending balance sheet for 2018

Balance Sheet :

The balance sheet is the statement which shows the financial position of the company and this will be used by the various entity like creditors, shareholder's, debenture holders.

Answer and Explanation:

1 2017 2018
Costs incurred Up to Date $600,000 $1,300,000
Estimated costs to complete, December 31 $1,400,000 $1,200,000
Total Cost $2,000,000 $2,500,000
Percentage Of Completion $0 $1
2 Revenue to date:
Percent complete x contract price $900,000 $1,560,000
Revenue recognized in current year $900,000 $660,000
Costs incurred in current year $(600,000) $(700,000)
Profit (loss) recognized $300,000 $(40,000)
Partial Income Statement 2017 2018
Construction revenue $900,000 $660,000
Construction expense $600,000 $700,000
Gross profit (loss) $300,000 $(40,000)
3 Partial Balance Sheet December 2017
Current Assets
Accounts receivable $100,000
Inventory
Construction in progress $900,000
Less: Partial billings $500,000
Costs and recognized profit not yet billed $400,000
4 Partial Balance Sheet December 2018
Current Assets
Accounts receivable $150,000
Inventory
Construction in progress $1,560,000
Less: Partial billings $1,350,000
Costs and recognized profit not yet billed $210,000


Learn more about this topic:

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Comparative Statements as Balance Sheet Disclosures

from Accounting 201: Intermediate Accounting I

Chapter 4 / Lesson 9
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