(recognition of Profit, Percentage-of-completion) 3 In 2012, Gurney Construction Company agreed to construct an apartment building at a price of $1,200,000. The information relating to

(recognition of Profit, Percentage-of-completion)

3

In 2012, Gurney Construction Company agreed to construct an apartment building at a price of $1,200,000. The information relating to the costs and billings for this contract is shown below.

2012 2013 2014

Costs incurred to date $280,000 $600,000  785,000 $

Estimated costs yet to be incurred 520,000 200,000    –0–

Customer billings to date 150,000 500,000 1,200,000

Collection of billings to date 120,000 320,000 940,000

Instructions

(a) Assuming that the percentage-of-completion method is used, (1) compute the amount of gross profit to be recognized in 2012 and 2013, and (2) prepare journal entries for 2013.

(b) For 2013, show how the details related to this construction contract would be disclosed on the balance sheet and on the income statement.

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(recognition of Profit, Percentage-of-completion)
3
In 2012, Gurney Construction Company agreed to construct an apartment building at a price
of $1,200,000. The information relating to the costs and billings for this contract is shown
below.
2012
2013
2014
Costs incurred to date
$280,000
$600,000
785,000 $
Estimated costs yet to be incurred
520,000
200,000
–0–
Customer billings to date
150,000
500,000
1,200,000
Collection of billings to date
120,000
320,000
940,000
Instructions
(a)
Assuming that the percentage-of-completion method is used, (1) compute the amount of gross
profit to be recognized in 2012 and 2013, and (2) prepare journal entries for 2013.
(b)
For 2013, show how the details related to this construction contract would be disclosed on the
balance sheet and on the income statement.

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