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
|
XXXXXXXXXXXX
|
XXXXXXXXXX
|
|
Accounts Receivable
|
XXXXXXXXXX
|
$
|
|
Inventory
|
XXXXXXXXXXX
|
XXXXXXXXXX
|
|
Construction in progress
|
$
|
XXXXXXXXXX
|
|
Less:Partial Billings
|
$
|
XXXXXXXXXX
|
|
Costs and recognized profit not yet billed
|
XXXXXXXXXXX
|
$
|
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
Prepare the relevant sections of the ending balance sheet for 2013 under the completed-contract method.
|
Current Assets
|
XXXXXXXXXX
|
XXXXXXXXX
|
|
Accounts Receivable
|
XXXXXXXXXX
|
$
|
|
Inventory
|
XXXXXXXXXXXXX
|
XXXXXXXXXX
|
|
Construction in progress
|
$
|
XXXXXXXXX
|
|
Less:Partial Billings
|
$
|
XXXXXXXXXXX
|
|
Excess of Costs over related billings
|
XXXXXXXXXX
|
$
|
Prepare the relevant sections of the ending balance sheet for 2014 under the completed-contract method.
|
Current Assets
|
XXXXXXXXXXXX
|
XXXXXXXXXX
|
|
Accounts Receivable
|
XXXXXXXXXXX
|
$
|
|
Inventory
|
XXXXXXXXXXX
|
XXXXXXXXXXX
|
|
Construction in progress
|
$
|
XXXXXXXXXX
|
|
Less:Partial Billings
|
$
|
XXXXXXXXXX
|
|
Excess of Costs over related billings
|
XXXXXXXXXXXXX
|
$
|
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
|
|
$
|