Question

Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2018, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,240,000. Curtiss concludes that the contract does not qualify for revenue recognition over time. The building was completed on December 31, 2020. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows:

	At 12-31-2018				At 12-31-2019				At 12-31-2020
Percentage of completion		10	%			60	%			100	%
Costs incurred to date	$	363,000			$	2,688,000			$	4,534,000
Estimated costs to complete		3,267,000				1,792,000				0
Billings to Axelrod, to date		724,000				2,250,000				4,240,000

Required:
1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years.
2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit or loss to be recognized in each of the three years.
3. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2018 and 2019 as either cost in excess of billings or billings in excess of costs.

Answer 1

Solution 1:

Computation of Gross Profit - Revenue on completion - Curtiss Construction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	Contract Price (D)	Gross Profit
2017	$363,000	$363,000	$3,630,000	$4,240,000	$0
2018	$2,325,000	$2,688,000	$4,480,000	$4,240,000	-$240,000
2019	$1,846,000	$4,534,000	$4,534,000	$4,240,000	-$54,000

Solution 2:

Computation of % of completion, revenue recognition and Gross Profit - Curtiss Construction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D) (B/C)	Contract Price (E)	Total Revenue to be recoganized (F) (E * D)	Revenue for current period (G)	Gross Profit (H) (G-A)
2017	$363,000	$363,000	$3,630,000	10.00%	$4,240,000	$424,000	$424,000	$61,000	$424,000 - $363,000
2018	$2,325,000	$2,688,000	$4,480,000	60.00%	$4,240,000	$2,544,000	$2,120,000	-$301,000	$4,240,000 - $4,480,000 - $61,000
2019	$1,846,000	$4,534,000	$4,534,000	100.00%	$4,240,000	$4,240,000	$1,696,000	-$54,000	$4,240,000 - $4,534,000 - $61,000 + $301,000

Solution 3:

Curtiss construction company
Balance Sheet (Partial)
As on December 31
Particulars	2018	2019
Assets:
Current Assets:
Cost and Profit in excess of billing 2019 - $2,024,000 - $1,526,000 - $300,000		$198,000.00
Liabilities and stockholder's equity:
Billings in excess of costs and profits 2018 - $724,000 - $424,000	$300,000.00