Percentage of Completion The Koolman Construction Company began work on a contract in 2007. The contract price is $3,000,000, and the company uses the percentage of completion method. Other information relating to the contract is as follows:
|
2007 |
2008 |
|
|
Costs incurred during the year |
$600,000 |
$700,000 |
|
Estimated costs to complete, December 31 |
1,400,000 |
1,200,000 |
|
Billings during the year |
500,000 |
850,000 |
|
Collections during the year |
400,000 |
800,000 |
Required
1. Compute the gross profit or loss recognized in 2007 and 2008.
2. Prepare the appropriate sections of the income statement and ending balance sheet for each year.