London, Inc., began operation of its construction division on October 1, 2014, and entered into contracts for two separate projects. The Beta project contract price was $600,000 and provided for penalties of $10,000 per week for late completion. Although during 2015 the Beta project had been on schedule for timely completion, it was completed four weeks late in August 2016. The Gamma project€™s original contract price was $800,000. Change orders during 2016 added $40,000 to the original contract price. The following data pertain to the separate long-term construction projects in progress:

Additional Information
London accounts for its long-term construction contracts using the percentage-of-completion method for financial reporting purposes and the completed-contract method for income tax purposes.

Required:
1. Prepare a schedule showing London€™s gross profit (loss) recognized for the years ended September 30, 2015 and 2016, under the percentage-of-completion method.
2. Prepare a schedule showing London€™s balances in the following accounts at September 30, 2015, under the percentage-of-completion method:
€¢ Accounts receivable
€¢ Costs and estimated earnings in excess of billings
€¢ Billings in excess of costs and estimated earnings
3. Determine how much income would be recognized if London used the completed-contract method for the 2015 and 2016 fiscalyears.

Transcribed Image Text:

Beta Gamma As of Septemher 30, 2015: Costs incurred to date Estimated costs to complete Billings Cash collections $360,000 40,000 315,000 275,000 $410,000 410,000 440,000 365,000 As of Septemher 30, 2016: Cost incurred to date Estimated costs to complete Billings Cash collections 450,000 720,000 180,000 710,000 625,000 560,000 560,000