Long-term Contracts Koolman Construction Company began work on a contract in 201

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:

Required:

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

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

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

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

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

Explanation / Answer

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

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