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Long-Term Construction Contracts:

Forman Company has contracted to build a dam over a period of 4 years for $3,000,000. Information relating to the performance of the contract is summarized as follows:

1. a. Compute the profit or loss for each year of the contract under the percentage-of-completion method. Enter losses as a negative number.

2013

2014

2015

2016

$

$

$

$

b. Compute the profit or loss for each year of the contract under the completed-contract method. Enter losses as a negative number.

2013

2014

2015

2016

$

$

$

$

2. a. Prepare the relevant sections of the income statement for each year under the percentage-of-completion method

 

2013

2014

2015

2016

Construct Revenue

$

$

$

$

Construction Expense

        

Gross Profit (loss)

        

Prepare the relevant sections of the ending balance sheet for 2013 under the percentage-of-completion method.

Balance Sheet

Partial

12/31/13

Current Assets

XXXXXXX

XXXXXXXX

Accounts Receivable

XXXXXXXX

$

Inventory

XXXXXXXX

XXXXXXXX

Construction in progress

$

XXXXXXXX

Less:Partial Billings

$

XXXXXXXX

Costs and recognized profit not yet billed

XXXXXXXX

$

Prepare the relevant sections of the ending balance sheet for 2014 under the percentage-of-completion method.

Balance Sheet

Partial

12/31/13

Current Assets

XXXXXXXX

XXXXXXXX

Accounts Receivable

XXXXXXXX

$

Inventory

XXXXXXXX

XXXXXXXX

Construction in progress

$

XXXXXXXX

Less:Partial Billings

$

XXXXXXXX

Costs and recognized profit not yet billed

XXXXXXXX

$

Prepare the relevant sections of the ending balance sheet for 2015 under the percentage-of-completion method.

Balance Sheet

Partial

12/31/13

Current Assets

    

Accounts Receivable

  

$

Inventory

    

Construction in progress

$

  

Less:Partial Billings

$

  

Costs and recognized profit not yet billed

  

$

b. Prepare the relevant sections of the income statement for each year under the completed-contract method. Enter losses as a negative number.

Income Statement (Partial) Years 2013 through 2016

2013

2014

2015

2016

$

      

Prepare the relevant sections of the ending balance sheet for 2013 under the completed-contract method.

Current Assets

    

Accounts Receivable

  

$

Inventory

    

Construction in progress

$

  

Less:Partial Billings

$

  

Excess of Costs over related billings

  

$

Prepare the relevant sections of the ending balance sheet for 2014 under the completed-contract method.

Current Assets

    

Accounts Receivable

  

$

Inventory

    

Construction in progress

$

  

Less:Partial Billings

$

  

Excess of Costs over related billings

  

$

Prepare the relevant sections of the ending balance sheet for 2015 under the completed-contract method.

Current Assets

    

Accounts Receivable

  

$

Inventory

    

Construction in progress

$

  

Less:Partial Billings

$

  

Excess of Costs over related billings

  

$

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M91755714

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