EXERCISE 18-10 (15-25 minutes)

DERRICK ADKINS CONSTRUCTION COMPANY

Partial Income Statement

Year Ended December 31, 2004

_____________________________________________________________

Revenue from long-term contracts (Project 3)                                   $500,000

Costs of construction (Project 3)                                                            330,000

Gross profit                                                                                                 170,000

Provision for loss (Project 1)*                                                                    (30,000)

*Contract costs through 12/31/04                             $450,000

Estimated costs to complete                                      140,000

Total estimated costs                                                   590,000

Total contract price                                                      560,000

Loss recognized in 2004                                           $ (30,000 )

DERRICK ADKINS CONSTRUCTION COMPANY

Partial Balance Sheet

December 31, 2004

                                                                                                                                        

Current assets:

        Accounts receivable                                                                           $90,000

            ($1,080,000 – $990,000)

        Inventories

                Construction in process                                  $420,000 *

                Less:  Billings                                                      360,000

                Unbilled contract costs (Project 1)                                            60,000

Current liabilities:

        Billings ($220,000) in excess of contract

            costs ($126,000) (Project 2)                                                             94,000

*The loss of $30,000 was subtracted from the construction in process account.