The following are the operating activities of three different companies: Company A: Engages in long-term construction contracts.

Question:

The following are the operating activities of three different companies: Company A: Engages in long-term construction contracts. Uses the percentage-of-completion method to recognize gross profits. Started contract X in 2006, contract Y in 2007, and contract Z in 2008. The total gross profit (estimated and actual) and the percentage completed for each contract during 2007 through 2009 are:

Company B: Engages in long-term service contracts involving a specific number of defined but not similar service acts. Uses proportional performance method to recognize revenues. Sells two-year service contracts for $400 in advance. Each service contract requires Company B to perform service act 1 a total of 50 times and service act 2 a total of 20 times during the two-year period. At the beginning of 2007, 100 service contracts were sold. The following is a summary of the related cost information for the 100 service contracts:
Initial direct costs ....................$ 3,500
Annual indirect costs ..................4,500
Estimated (and actual) total direct costs (for two-year period) ...10,000
Direct cost per service act
Service act 1 .....................$ 1.20
Service act 2 ........................2.00
During 2007, service act 1 was performed 2,700 times and service act 2 was performed 800 times. During 2008, service acts 1 and 2 were performed 2,300 and 1,200 times, respectively. Company C: Sells goods on the installment basis. Uses the installment method (because these are exceptional cases) to recognize gross profits. The following is a summary of the installment sales, costs of installment sales, operating expenses, and collections for 2007 and 2008:

Required
1. Prepare a schedule that shows Company A's gross profit for 2007, 2008, and 2009.
2. Prepare 2007 and 2008 condensed income statements for Company B.
3. Prepare 2007 and 2008 condensed income statements for CompanyC.