Dunia Edukasi: PROBLEM 18-3

Thursday, February 2, 2017

PROBLEM 18-3

(a) Gross profit recognized in:

	2004		2005		2006
Contract price		$3,000,000		$3,000,000		$3,000,000
Costs:			$1,560,000		$2,100,000
Costs to date	$ 600,000
Estimated costs to complete	1,400,000	2,000,000	390,000	1,950,000	0	2,100,000
Total estimated profit		1,000,000		1,050,000		900,000
Percentage completed to date		30%*		80%**		100%
Total gross profit recognized		300,000		840,000		900,000
Less: Gross profit recognized in previous years		0		300,000		840,000
Gross profit recognized in current year		$ 300,000		$ 540,000		$ 60,000

**$600,000 ÷ $2,000,000

**$1,560,000 ÷ $1,950,000

(b) Construction in Process....................................... 540,000

($2,100,000 – $1,560,000)

Materials, Cash, Payables, etc..................... 540,000

Accounts Receivable............................................. 900,000

($3,000,000 – $2,100,000)

Billings on Construction in Process........... 900,000

Cash ($2,750,000 – $1,950,000)........................... 800,000

Accounts Receivable..................................... 800,000

Construction Expenses........................................ 540,000

Construction in Process....................................... 60,000

Revenue from Long-term Contracts........... 600,000*

*$3,000,000 X (100% – 80%)

Billings on Construction in Process.............. 3,000,000

Construction in Process.......................... 3,000,000

Balance Sheet (Partial)

December 31, 2005

Current assets:

Accounts receivable $150,000

($2,100,000 – $1,950,000)

Inventories

Construction in process $2,400,000

($1,560,000 + $840,000)

Less: Billings 2,100,000

Costs and recognized gross

profit in excess of billings 300,000

Dunia Edukasi