Question - Recognition of Profit and Balance Sheet Presentation, Percentage-of-Completion
On February 1, 2010, Hewitt Construction Company obtained a contract to build an athletic stadium. The stadium was to be built at a total cost of $5,400,000 and was scheduled for completion by September 1, 2012. One clause of the contract stated that Hewitt was to deduct $15,000 from the $6,600,000 billing price for each week that completion was delayed. Completion was delayed 6 weeks, which resulted in a $90,000 penalty. Below are the data pertaining to the construction period.
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|
2010
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2011
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2012
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|
Costs to date
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$1,620,000
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$3,850,000
|
$5,500,000
|
|
Estimated costs to complete
|
3,780,000
|
1,650,000
|
-0-
|
|
Progress billings to date
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1,200,000
|
3,300,000
|
6,510,000
|
|
Cash collected to date
|
1,000,000
|
2,800,000
|
6,510,000
|
QUESTIONS:
(a) Using the percentage-of-completion method, compute the estimated gross profit recognized in the years 2010-2012.
(b) Prepare a partial balance sheet for December 31, 2011, showing the balances in the receivable and inventory accounts.