On July 1, 2020, Crane Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of$ 1,910,000. On July 1, Crane estimated that it would take between 2 and 3 years to complete the building. On December 31, 2022,the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete thecontract, and accumulated billings to Gumbel for 2020, 2021, and 2022.AtAtAt12/31/2012/31/2112/31/22Contract costs incurred to date$327,800$ 1,180,000$ 2,090,400Estimated costs to complete the contract1,162,200820,000-0-Billings to Gumbel300,0001,110,0001,870,000 (b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contractfor the years ended December 31, 2020, 2021, and 2022. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any fieldsblank. If an amount should be deducted then enter the amount using either a negative sign prececeding the number eg. -45 or parenthesis e-g.(45).)2021Estimated Total CostsContract PriceProfit/ (Loss) Recognized in 20212$2022Costs Incurred$Contract PriceTotal Profit/(Loss) on ContractProfit/(Loss) Recognized in 2021 vProfit / (Loss) Recognized in 2022$4

Completed Contract Method: In accordance with the completed contract method (CCM), all revenue and cost recognition is postponed until the contract's conclusion. As a result of deferring revenue recognition, tax obligations may also be deferred; however, deferring cost recognition, which may lower tax liabilities, is also deferred.Particulars Amount Estimated Total Cost ( 1,180,000 + 820,000) 2,000,000 Contract Price 1,920,000 Profit & loss (80,000) Particulars Amount Estimated Total Cost 2,090,400 Contract Price 1,920,000 Total Profit & loss 170,400 Add: loss for 2021 80,000 Profit for 2022 250,400

Business

Accounting

On July 1, 2020, Crane Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $ 1,910,000. On July 1, Crane estimated that it would take between 2 and 3 years to complete the building. On December 31, 2022, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2020, 2021, and 2022. At At At 12/31/20 12/31/21 12/31/22 Contract costs incurred to date $327,800 $ 1,180,000 $ 2,090,400 Estimated costs to complete the contract 1,162,200 820,000 -0- Billings to Gumbel 300,000 1,110,000 1,870,000

On July 1, 2020, Crane Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $ 1,910,000. On July 1, Crane estimated that it would take between 2 and 3 years to complete the building. On December 31, 2022, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2020, 2021, and 2022. At At At 12/31/20 12/31/21 12/31/22 Contract costs incurred to date $327,800 $ 1,180,000 $ 2,090,400 Estimated costs to complete the contract 1,162,200 820,000 -0- Billings to Gumbel 300,000 1,110,000 1,870,000

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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