PROBLEM 18-4

PROBLEM 18-4

(a)		2004	2005	2006
	Contract price	$6,600,000	$6,600,000	$6,510,000
	Less estimated cost:
	Cost to date	1,782,000	3,850,000	5,500,000
	Estimated cost to complete	3,618,000	1,650,000	—
	Estimated total cost	5,400,000	5,500,000	5,500,000
	Estimated total gross profit	$1,200,000	$1,100,000	$1,010,000

        Gross profit recognized in—

2004:	$1,782,000	X $1,200,000 =	$396,000
	$5,400,000
2005:	$3,850,000	X $1,100,000 =		$770,000
	$5,500,000
	Less: 2004 recognized gross     profit			396,000
	Gross profit in 2005			$374,000
2006:	Less: 2004–2005 recognized     gross profit				770,000
	Gross profit in 2006				$240,000

(b)                                BEARD CONSTRUCTION COMPANY

                                                         Balance Sheet

                                                     December 31, 2005

                                                                                                                                        

        Current assets:

                Accounts receivable                                                             $   300,000

                    ($3,100,000 – $2,800,000)

                Inventories

                Construction in process*                          $4,620,000

                Less:  Billings                                                3,100,000

                Costs and recognized gross

                    profit in excess of billings                       1,520,000

        *$6,600,000 X ($3,850,000 ÷ $5,500,000)