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: December 31 2019 2020 2021 Costs incurred to date $8,000,000 $16,000,000 $18,000,000 Estimated costs to complete 6,000,000 3,000,000 — Billings to date 8,000,000 16,000,000 20,000,000 Collections to date 6,000,000 12,000,000 18,000,000 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.
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: December 31 2019 2020 2021 Costs incurred to date $8,000,000 $16,000,000 $18,000,000 Estimated costs to complete 6,000,000 3,000,000 — Billings to date 8,000,000 16,000,000 20,000,000 Collections to date 6,000,000 12,000,000 18,000,000 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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:
|
|
December 31
|
||
|
2019
|
2020
|
2021
|
|
| Costs incurred to date | $8,000,000 | $16,000,000 | $18,000,000 |
| Estimated costs to complete | 6,000,000 | 3,000,000 | — |
| Billings to date | 8,000,000 | 16,000,000 | 20,000,000 |
| Collections to date | 6,000,000 | 12,000,000 | 18,000,000 |
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 |
| 5. | How will this project be carried on the balance sheet for 2019, 2020, and 2021? |
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