Exercises Exercise 4-1 Construction accounting The Gagliano Construction Company contracted to build an office building for $2,000,000. Construc tion began in 1997 and was completed in 1998. Data relating to the contract are summarized below: percentage-of-completion and completed contract methods Costs incurred during the year Estimated costs to complete as of 12/31 Billings during the year Cash collections during the year 1997 1998 $1,575,000 $ 300,000 1,200,000 360,000 250,000 1,640,000 1,750,000 Required: 1. Compute the amount of gross profit or loss to be recognized in 1997 and 1998 using the percentage-of-completion method. 2. Compute the amount of gross profit or loss to be recognized in 1997 and 1998 using the completed contract method. 3. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 1997 using the percentage-of completion method. 4. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 1997 using the completed contract method.
Exercises
Exercise 4-1
Construction accounting
The Gagliano Construction Company contracted to build an office building for $2,000,000. Construc tion began in 1997 and was completed in 1998. Data relating to the contract are summarized below:
percentage-of-completion and completed contract methods
Costs incurred during the year
Estimated costs to complete as of 12/31
Billings during the year
Cash collections during the year
1997
1998
$1,575,000
$ 300,000
1,200,000
360,000
250,000
1,640,000
1,750,000
Required:
1. Compute the amount of gross profit or loss to be recognized in 1997 and 1998 using the
percentage-of-completion method. 2. Compute the amount of gross profit or loss to be recognized in 1997 and 1998 using the completed contract method.
3. Prepare a partial
presented at the end of 1997 using the percentage-of completion method.
4. Prepare a partial balance sheet to show how the information related to this contract would be
presented at the end of 1997 using the completed contract method.
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