Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2018,to construct a four-story office building. At that time, Curtiss estimated that it would take between two and threeyears to complete the project. The total contract price for construction of the building is $4,000,000. Curtissconcludes that the contract does not qualify for revenue recognition over time. The building was completed onDecember 31, 2020. Estimated percentage of completion, accumulated contract costs incurred, estimated costs tocomplete the contract, and accumulated billings to Axelrod under the contract were as follows:At 12-31-2018 At 12-31-2019 At 12-31-2020Percentage of completion 10% 60% 100%Costs incurred to date $ 350,000 $2,500,000 $4,250,000Estimated costs to complete 3,150,000 1,700,000 –0–Billings to Axelrod, to date 720,000 2,170,000 3,600,000Required:1. For each of the three years, prepare a schedule to compute total gross profit or loss to be recognized as aresult of this contract.2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profitor loss to be recognized in each of the three years.3. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amountto be shown in the balance sheet at the end of 2018 and 2019 as either cost in excess of billings or billings inexcess of costs.
Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2018,
to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three
years to complete the project. The total contract price for construction of the building is $4,000,000. Curtiss
concludes that the contract does not qualify for revenue recognition over time. The building was completed on
December 31, 2020. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to
complete the contract, and accumulated billings to Axelrod under the contract were as follows:
At 12-31-2018 At 12-31-2019 At 12-31-2020
Percentage of completion 10% 60% 100%
Costs incurred to date $ 350,000 $2,500,000 $4,250,000
Estimated costs to complete 3,150,000 1,700,000 –0–
Billings to Axelrod, to date 720,000 2,170,000 3,600,000
Required:
1. For each of the three years, prepare a schedule to compute total gross profit or loss to be recognized as a
result of this contract.
2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit
or loss to be recognized in each of the three years.
3. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount
to be shown in the
excess of costs.
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