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 $4,000,000. 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:
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 $4,000,000. 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:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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![Problem 6-12 (Static) Long-term contract; revenue recognized over time vs. upon project completion;
loss projected on entire project [LO6-9]
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 $4,000,000. 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:
Percentage of completion
Costs incurred to date
Estimated costs to complete
Billings to Axelrod, to date
Required:
At 12-31-2024
At 12-31-2025
At 12-31-2026
10%
60%
100%
$ 350,000
3,150,000
720,000
$ 2,500,000
1,700,000
2,170,000
$ 4,250,000
4,000,000
0
1. 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.
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
balance sheet at the end of 2024 and 2025 as either cost in excess of billings or billings in excess of costs.
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Transcribed Image Text:Problem 6-12 (Static) Long-term contract; revenue recognized over time vs. upon project completion;
loss projected on entire project [LO6-9]
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 $4,000,000. 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:
Percentage of completion
Costs incurred to date
Estimated costs to complete
Billings to Axelrod, to date
Required:
At 12-31-2024
At 12-31-2025
At 12-31-2026
10%
60%
100%
$ 350,000
3,150,000
720,000
$ 2,500,000
1,700,000
2,170,000
$ 4,250,000
4,000,000
0
1. 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.
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
balance sheet at the end of 2024 and 2025 as either cost in excess of billings or billings in excess of costs.
Complete this question by entering your answers in the tabs below.
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Step 1: Define 'Revenue Recognition':
VIEWStep 2: (1) Compute gross profit or loss to be recognized for the contract for each of the three years:
VIEWStep 3: (2) Compute gross profit or loss to be recognized for the contract for each of the three years:
VIEWStep 4: (3) Compute the amount to be shown in the balance sheet at the end of 2024 and 2025:
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