(a1) The board of directors of Ogle Construction Company is meeting to choose be
ID: 2469775 • Letter: #
Question
(a1)
The board of directors of Ogle Construction Company is meeting to choose between the completed-contract method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Ogle's controller in the preparation of a presentation to be given at the board meeting. The controller provides you with the following information:1. Ogle commenced doing business on January 1, 2015. 2. Construction activities for the year ended December 31, 2015, were as follows:
Project Total Contract
Price Billings Through
12/31/15 Cash Collections
Through 12/31/15 A $ 500,000 $ 340,000 $ 310,000 B 720,000 210,000 210,000 C 475,000 475,000 390,000 D 200,000 100,000 65,000 E 450,000 400,000 400,000 $2,345,000 $1,525,000 $1,375,000 Project Contract Costs
Incurred Through
12/31/15 Estimated
Additional Costs to
Complete Contracts A $ 424,000 $101,000 B 195,000 455,000 C 350,000 -0- D 123,000 97,000 E 320,000 80,000 $1,412,000 $733,000 3. Each contract is with a different customer. 4. Any work remaining to be done on the contracts is expected to be completed in 2016.
Explanation / Answer
(a1)
The amount of income (or loss) under the completed-contract method before selling, general, and administrative expenses for the year ended December 31, 2015 is:
Project
A (25,000)
B 0
C 125,000
D (20,000)
E 0
Net Income $80,000
The amount of income (or loss) under the percentage-of-completion method before selling, general, and administrative expenses for the year ended December 31, 2015 is:
Project
A (25,000)
B 21,000 $70,000*(195,000/650,000)
C 125,000 $125,000*(350,000/350,000)
D (20,000)
E 40,000 $50,000*(320,000/400,000)
Net Income $141,000
Projects A B C D E Contract Price $ 500,000 720,000 475,000 200,000 450,000 Contract Costs Incurred $ 424,000 195,000 350,000 123,000 320,000 Additional Costs to complete $ 101,000 455,000 0 97,000 80,000 Total Cost $ 525,000 650,000 350,000 220,000 400,000 Total Gross Profit/(loss) (25,000) 70,000 125,000 (20,000) 50,000Related Questions
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