Long Term Construction Contracts The Forman Company has contracted to build a dam over a period of four years for $3,000,000. Information relating to the performance of the contract is summarized as follows:
|
2007 |
2008 |
2009 |
2010 |
|
|
Construction costs incurred during the year |
$300,000 |
$1,100,000 |
$863,000 |
$837,000 |
|
Estimated costs to complete |
2,200,000 |
1,400,000 |
837,000 |
— |
|
Billings during the year |
280,000 |
870,000 |
1,030,000 |
820,000 |
|
Collections during the year |
270,000 |
875,000 |
1,010,000 |
845,000 |
Required
1. Compute the profit or loss for each year of the contract under (a) the percentage of completion method, and (b) the completed contract method.
2. Prepare the relevant sections of the income statement and ending balance sheet for each year under (a) the percentage of completion method, and (b) the completed contract method.