The Forman Company has contracted to build a dam over a period of four years for $3,000,000. Information relating to the performance of the contract is summarized as follows:

Required
1. Compute the profit or loss for each year of the contract under (a) the percentage-of-completion method, and (b) the completed-contract method.
2. Prepare the relevant sections of the income statement and ending balance sheet for each year under (a) the percentage-of completion method, and (b) the completed-contractmethod.

Transcribed Image Text:

2007 2008 2009 2010 Construction costs incurred during the year Estimated costs to complete Billings during the year Collections during the year 300,000 $1,100,000 S 863,000 837,000 $837,000 2,200,000 1,400,000 280,000 870,000 1,030,000 820,000 270,000 875,000 1010,000 845,000