Jorg is building an office building for Wilmington Company for $20,000,000. The contract has the following characteristics:
• The office building is built to the customer’s specifications and the customer can make changes to these specifications over the contract term.
• Progress payments are made by the customer throughout construction.

• The customer can cancel the contract at any time (with a termination penalty); any work in process is the property of the customer. Jorg provides you with the following details:

Required:
1. Calculate the estimated total gross profit on the contract as of December 31, 2019, 2020, and 2021.
2. Calculate the percentage of completion for 2019, 2020, and 2021.
3. Calculate the amount of income (loss) Jorg will recognize for 2019, 2020, and 2021.
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 2019, 2020, and 2021?

Transcribed Image Text:

December 31, 2019 2020 2021 $8,000,000 6,000,000 8,000,000 6,000,000 $16,000,000 3,000,000 16,000,000 12,000,000 $18,000,000 Costs incurred to date Estimated costs to complete Billings to date Collections to date 20,000,000 18,000,000