Question - Harpley Construction Company contracted to build a parking garage for $42,000,000. The contract was entered into at the beginning of 2018 and is expected to be completed in September 2019. At the end of 2018, the costs to date were $12,210,000 and the estimated total costs to complete were $20,290,000. The billings on contract during 2018 were $8,400,000 and the cash collected during 2018 was $5,600,000.
Assuming that Harpley uses the percentage-of-completion method of accounting for long-term contracts, use the above information to answer the questions below (a blank sheet is provided on the next page of your work). ROUND percentage of completion to the NEAREST PERCENTAGE POINT [ex: round 35.58% up to 36%; round 64.40% down to 64%, etc.)
a. On the 2018 balance sheet, what is the appropriate balance in the Construction in Process (CIP) Inventory account?
b. What amount of gross profit or loss on the long-term contract will Harpley report in 2018?