On July 1, 2014, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. O
On July 1, 2014, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1,
\r\nTorvill estimated that it would take between 2 and 3 years to complete the building. On December 31,
\r\n2016, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2014, 2015, and 2016.
\r\nAt At At
\r\n12/31/14 12/31/15 12/31/16
\r\nContract costs incurred to date $ 300,000 $1,200,000 $2,100,000
\r\nEstimated costs to complete the contract 1,200,000 800,000 –0–
\r\nBillings to Gumbel 300,000 1,100,000 1,850,000
\r\nInstructions
\r\n(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, 2014, 2015, and 2016. (Ignore income taxes.)
\r\n(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore income taxes.)