Curtiss Construction Company, Incorporated, entered into a fixed-price contract with Axelrod Associates on July 1, 2024, 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 $4,720,000. The building was completed on December 31, 2026. 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 12-31-2024 At 12-31-2025 At 12-31-2026 Percentage of completion 10% 60% 100% Costs incurred to date $ 371,000 $ 3,024,000 $ 5,102,000 Estimated costs to complete 3,339,000 2,016,000 0 Billings to Axelrod, to date 732,000 2,410,000 4,720,000 Required: Compute gross profit or loss to be recognized as a result of this contract for each of the three years. Curtiss concludes that the contract does not qualify for revenue recognition over time. 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. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2024 and 2025 as either cost in excess of billings or billings in excess of costs.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Curtiss Construction Company, Incorporated, entered into a fixed-price contract with Axelrod Associates on July 1, 2024, 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 $4,720,000. The building was completed on December 31, 2026. 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 12-31-2024	At 12-31-2025	At 12-31-2026
Percentage of completion	10%	60%	100%
Costs incurred to date	$ 371,000	$ 3,024,000	$ 5,102,000
Estimated costs to complete	3,339,000	2,016,000	0
Billings to Axelrod, to date	732,000	2,410,000	4,720,000

Required:

Compute gross profit or loss to be recognized as a result of this contract for each of the three years. Curtiss concludes that the contract does not qualify for revenue recognition over time.

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.

Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2024 and 2025 as either cost in excess of billings or billings in excess of costs.

The image is a partial balance sheet template for the years 2024 and 2025. It is divided into two main sections: "Current assets" and "Current liabilities."

### Balance Sheet (Partial)

#### Current Assets:
- There are two rows under this section, intended for listing specific current assets for 2024 and 2025.

#### Current Liabilities:
- This section also has two rows, meant for detailing specific current liabilities for each year.

Each section provides space to input numerical values or descriptions relevant to the financial years indicated. This template helps in organizing and comparing financial data across the two consecutive years.

The table presents the recognition of gross profit (or loss) for a project across two different requirements: "Upon Completion" and "Over Time." The data is organized by year and is structured as follows:

- **Year**:
- 2024
- 2025
- 2026

- **Req 1: Gross Profit (Loss) Recognized ("Upon Completion")**:
- 2024: No data
- 2025: No data
- 2026: No data
- Total project profit (loss) for all years: $0

- **Req 2: Gross Profit (Loss) Recognized ("Over Time")**:
- 2024: No data
- 2025: No data
- 2026: No data
- Total project profit (loss) for all years: $0

The table indicates that for both recognition methods, no profit or loss has been recorded for the years 2024, 2025, and 2026. The total project profit (or loss) across all years is zero for both methods.

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