Question

Long-term Contracts

Koolman Construction Company began work on a contract in 2017. The contract price is $3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows:

	2017	2018
Costs incurred during the year	$ 600,000	$ 700,000
Estimated costs to complete, December 31	$1,400,000	$1,200,000
Billings during the year	$500,000	$850,000
Collections during the year	$400,000	$800,000

Required:

1. Compute the gross profit or loss recognized in 2017 and 2018.

KOOLMAN CONSTRUCTION COMPANY
Gross Profit / Loss
2017 and 2018
	2017	2018
Construction costs incurred to date	$	$
Estimated costs to complete	$	$
Total estimated costs	$	$
Percentage completed	%	%
Revenue to date	$	$
Revenue recognized in current year	$	$
Costs incurred in current year
Profit (loss) recognized	$	$

2. Prepare the appropriate sections of the income statement for each year.

KOOLMAN CONSTRUCTION COMPANY
Partial Income Statement
For the Years Ended December 31, 2017 and 2018
	2017	2018
Construction revenue	$	$
Construction expense
Gross profit (loss)	$	$

Prepare the appropriate sections of the ending balance sheet for the year 2017.

KOOLMAN CONSTRUCTION COMPANY
Partial Balance Sheet
December 31, 2017
Current Assets:
Accounts receivable		$
Inventory:
Construction in progress	$
Less: Partial billings
Costs and recognized profit not yet billed

Prepare the appropriate sections of the ending balance sheet for 2018.

KOOLMAN CONSTRUCTION COMPANY
Partial Balance Sheet
December 31, 2018
Current Assets:
Accounts receivable		$
Inventory:
Construction in progress	$
Less: Partial billings
Costs and recognized profit not yet billed

Answer 1

KOOLMAN CONSTRUCTION COMPANY
Gross Profit / Loss
2017 and 2018
	2017	2018
Costs incurred to date	600000	1300000
Estimated costs to complete the contract	1400000	1200000
Total Estimated costs	2000000	2500000
Percentage completed	30%	52%
Revenue to Date	900000	1560000
Revenue recognized in current year	900000	660000
Costs incurred in current year	600000	700000
Profit/ (loss) recognized	300000	-40000

KOOLMAN CONSTRUCTION COMPANY
Partial income statement
For the years ended December 31, 2017 and December 31, 2018
	2017	2018
Construction Revenue	900000	660000
Construction Expense	600000	700000
Gross Profit / (Loss)	300000	-40000
KOOLMAN CONSTRUCTION COMPANY
Partial Balance Sheet
as at December 31, 2017 and December 31, 2018
	2017	2018
Current Assets:
Accounts Receivable	100000	150000
Inventory :
Construction in progress	900000	1560000
Less: Partial Billings	-500000	-1350000
Costs and recognized profits not yeat billed	400000	210000