Question

On July 1, 2017, Skysong Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,910,000. On July 1, Skysong estimated that it would take between 2 and 3 years to complete the building. On December 31, 2019, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2017, 2018, and 2019.

		At 12/31/17		At 12/31/18		At 12/31/19
Contract costs incurred to date		$327,800		$1,180,000		$2,090,400
Estimated costs to complete the contract		1,162,200		820,000		–0–
Billings to Gumbel		300,000		1,110,000		1,870,000

(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any field blank.

(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any fields blank.)

Answer 1

Answer a.
Percentage of Completion Method
	2017	2018	2019
Cost Incurred each year	327,800	852,200	910,400
Cost Incurred to date	327,800	1,180,000	2,090,400
Estimated Costs	1,162,200	820,000	-
Total Estimated Costs	1,490,000	2,000,000	2,090,400
% Completed	22.00%	59.00%	100.00%
Revenue	420,200	706,700	783,100
Expenses	327,800	852,200	910,400
Gross Profit	92,400	(145,500)	(127,300)
Revenue -
2017 - $1,910,000 X 22% + $420,200
2018 - $1,910,000 X 59% - $420,200 = $706,700
2019 = $1,910,000 - ($420,200 + $706,700) = $783,100
Answer 2.
Completed Contract Method
	2017	2018	2019
Revenue	-	-	1,910,000
Expenses	-	-	2,090,400
Gross Profit	-	-	(180,400)