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:

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 ______________

Explanation / Answer

a.

Computation of gross profit for Koolman Construction Company for the years 2017 and 2018 Contract price (construct highway) 3000000 Particulars 2017 2018 Estimated costs to complete 1400000 1200000 Costs incurred till date 600000 1300000 Total costs to complete 2000000 2500000 Billings during the year 500000 850000 Collections during the year 400000 800000 Percentage completion till date 30% 52% Revenue to date % completion * agreement price 900000 1560000 Revenue realized during the year 900000 660000 Costs included during the year 600000 700000 Gross profit for the year 300000 -40000 Gross profit for the year 2017= Revenue- Cost $900000-$600000= $300000 Loss for the year 2018 Revenue- Cost= $660000- $700000= $40000 b. Appropriate sections in the income statement and the balancesheet for the year 2017 and 2018 as below: Income statement for Koolman Construction Company particulars 2017 2018 Construction project revenue 900000 660000 Less: Construction project expenses 600000 700000 Gross profit/(loss) 300000 -40000 Balance sheet for Koolman Construction Company for 2017 Current assets accounts Receivable 100000 Construction in procedure account 900000 Less: part billing account 500000 Net expenses and profit till not billed 400000 Balance sheet for Koolman Construction Company for 2018 Current assets accounts Receivable 150000 Construction in procedure account 1560000 Less: part billing account 1350000 Net costs and profit till not billed 210000

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