Question

Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2021, 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 $4,600,000. The building was completed on December 31, 2023. 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 12-31-2021 At 12-31-2022 At 12-31-2023 Percentage of completion 10 % 60 % 100 % Costs incurred to date $ 369,000 $ 2,940,000 $ 4,960,000 Estimated costs to complete 3,321,000 1,960,000 0 Billings to Axelrod, to date 730,000 2,370,000 4,600,000 Required: 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years. Curtiss concludes that the contract does not qualify for revenue recognition over time. 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 2021 and 2022 as either cost in excess of billings or billings in excess of costs.

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• Req 1 and 2
• Req 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 2021 and 2022 as either cost in excess of billings or billings in excess of costs.

	Balance Sheet (Partial) 2021 2022 Current assets: Costs less loss in excess of billings Current liabilities: Billings in excess of costs and profit

Answer 1

Total Contract Price	4,600,000
	2021	2022	2023
Estimate % Completion	10%	60%	100%
Completion % during the year	10%	50%	40%
Cost Incurred to Date	369,000	2,940,000	4,960,000
Cost Incurred during the year	369,000	2,571,000	2,020,000
Estimated Cost to Complete	3,321,000	1,960,000	0
Total Estimated Cost to date	3,690,000	4,900,000	4,960,000
Billings to Date	730,000	2,370,000	4,600,000
1
Sales	0	0	4,600,000
Cost Incurred	369,000	2,571,000	2,020,000
Gross Profit / ( Loss )	-369,000	-2,571,000	2,580,000
2
Sales	460,000	2,300,000	1,840,000
Cost Incurred	369,000	2,571,000	2,020,000
Gross Profit / ( Loss )	91,000	-271,000	-180,000
3
Balance Sheet
Current Assets
Cost less Loss in Excess of Billings		299,000
Current Liabilities
Billings in Excess of Costs & Profits	270,000