Forman Company has contracted to build a dam over a period of 4 years for $3,000,000.
Question
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:
2013 2014 2015 2016
Construction costs incurred during the year $ 300,000 1,100,000 863,000 837,000
Estimated costs to complete 2,200,000 1,400.000 837,000 ————–
Billings during the year 280,000 870,000 1,030,000 820,000
Collections during the year 270,000 875,000 1,010,000 845,000
1, a Compute the profit or loss for each year of the contract under the percentage-of-completion method.
2013
2014
2015
2016
1.b Compute the profit or loss for each year of the contract under the completed contract method.
2013
2014
2015
2016
2a. Prepare the relevant sections of the income statement for each year under the percentage-of-completion method.
2013 2014 2015 2016
Construction Revenue
Construction Expenses
Gross profit/loss
Prepare the relevant sections of the ending balance sheet for 2013 under the percentage of completion method.
Current Assets
A/$
Inventory
Construction in progress
Less: partial billings
Costs and recognized profit not yet billed
Prepare relevant sections of the ending balance sheet for 2014 under the percentage of completion method
Current Assets
A/R
Inventory
Construction in progress
Less: partial billing
Cost and recognized profit not yet billed
Prepare the relevant balance sheet for 2015 under the percentage of completion method.
Current Assets
A/R
Inventory
Construction in progress
Less; partial billing
Costs not yet billed
Current liabilities
Provision for loss on contract
b. Prepare the relevant sections of the income statement per year under the completed contract method
2013 2014 2015 2016
Gross profit/loss
Prepare the relevant balance sheet for 2013 under the completed contract method.
Current Assets
A/R
Inventory
Construction in progress
Less: partial billings
Excess of costs over related billings
Prepare the 2014 relevant balance sheet using the completed contract method
Current Assets
A/R
Inventory
Construction in progress
Less: partial billing
Excess of costs over related billings
Prepare the relevant balance sheet for 2015 using the completed contract method
Current Assets
A/R
Current Liabilities
Partial billings
Less: construction in progress
Provision for loss on contract
Excess of billings and provision for loss over
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