Jorg Construction Company uses the percentage-of-completion method when total construction costs can be estimated. Jorg is building an office building for Wilmington Company for $20,000,000 with the following details:

Required:
1. Calculate the estimated total gross profit on the contract as of December 31, 2013, 2014, and 2015.
2. Calculate the percentage of completion for 2013, 2014, and 2015.
3. Calculate the amount of income (loss) Jorg will recognize for 2013, 2014, and 2015.
4. Prepare all journal entries related to this project for Jorg for all 3 years.
5. How will this project be carried on the balance sheet for 2013, 2014, and 2015?
6. How does a fluctuating estimated gross profit affect revenue recognition when using the percentage of- completion method?

Transcribed Image Text:

Costs incurred to date Estimated costs to complete Billings to date Collections to date 12/31/201:3 $8,000,000 6,000,000 8,000,000 6,000,000 12/31/2014 $16,000,000 3,000,000 16,000,000 12,000,000 12/31/2015 $18,000,000 20,000,000 18,000,000