Question

Problem 18-11

On July 1, 2017, Nash Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,890,000. On July 1, Nash 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		$312,900		$1,148,400		$2,076,000
Estimated costs to complete the contract		1,177,100		831,600		–0–
Billings to Gumbel		300,000		1,090,000		1,850,000

(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. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Computation of Recognizable Profit/Loss Completed-Contract Method:
2017	none
2018
Cost to date 31-12-2018	1,148,400
estimated cost to complete	831,600
Estimated total cost	1,980,000
Deduct contract price	1,890,000
Profit to be recognized in 2018	90,000
2019
Total costs recognized	2,076,000
Total revenue recognized	1,890,000
Total Profit on contract	186,000
Deduct profit recognized in 2018	90,000
Profit recognized in 2019	96,000