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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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King Construction Company began work on a contract in 2019. The contract price is $4,000,000, and King determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows:

Chapter 17, Problem 24E, King Construction Company began work on a contract in 2019. The contract price is 4,000,000, and

Required:

  1. 1. How much gross profit or loss does King recognize in 2019?
  2. 2. Next Level Prepare the appropriate sections of the 2019 income statement and ending balance sheet.

1.

To determine

Calculate the amount of gross profit recognized by Company K during 2019.

Explanation

Contract: Contract is an agreement among two parties or more parties which includes enforceable obligations and rights. A contract can be “written oral or implied” by ordinary business practices.

Compute the amount of gross profit:

ParticularsAmount
Construction costs incurred to date $800,000
Estimated costs to complete $2,400,000
Total estimated costs $3,200,000
Percentage completed ($800,000÷$3,200,000

2.

To determine

Prepare the appropriate sections of the 2019’ income statement and ending balance sheet.

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