Winter Company constructs office buildings in Ellensburg. It began a $50,000,000, 3-year contract on January 1, 2018.
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Question:
Winter Company constructs office buildings in Ellensburg. It began a $50,000,000, 3-year contract on January 1, 2018. The following information is available regarding this contract.
| 2018 | 2019 | 2020 |
Costs incurred during current year | $ 12,000,000 | $ 20,000,000 | $ 13,000,000 |
Estimated costs to complete at year end | 28,000,000 | 10,000,000 | 0 |
Progress billings during year | 10,000,000 | 18,000,000 | 22,000,000 |
Collections on billings during year | 8,000,000 | 17,000,000 | 25,000,000 |
Required:
- Assuming Winter uses the percentage-of-completion method, calculate the gross profit to be recognized in 2018 and 2019.
- Assuming Winter uses the percentage-of-completion method, indicate how the contract would be presented on Winter’s income statement for the year ended December 31, 2019.
- Assuming Winter uses the completed-contract method, calculate the gross profit to be recognized in 2020.
- Assuming Winter uses the completed-contract method, indicate how the contract would be presented on Winter’s balance sheet (Accounts Receivable and Construction-in-process) for the year ended December 31, 2019.
- Assuming Winter uses the completed-contract method and billings in 2019 are $40,000,000 instead of $18,000,000, what will be the effect on the balance sheet in 2019?
Related Book For
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078025778
17th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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