(Recognition of Profit, Percentage of Completion) In 2012, Gurney Construction Company agreed to construct an apartment building at a price of $1,200,000. The information relating to the costs and billings for this contract is shown below.
|
2012 |
2013 |
2014 |
|
|
Costs incurred to date |
$280,000 |
$600,000 |
$ 785,000 |
|
Estimated costs yet to be incurred |
520,000 |
200,000 |
–0– |
|
Customer billings to date |
150,000 |
500,000 |
1,200,000 |
|
Collection of billings to date |
120,000 |
320,000 |
940,000 |
Instructions
(a) Assuming that the percentage of completion method is used, (1) compute the amount of gross profit to be recognized in 2012 and 2013, and (2) prepare journal entries for 2013.
(b) For 2013, show how the details related to this construction contract would be disclosed on the balance sheet and on the income statement.