Question - Dolphin Construction Company, Inc., entered into a firm fixed- price contract on October 1, 2014, to construct a three-story medical building. At that time, Dolphin estimated that it would take 2 to 3 years to complete the project. The total contract price for construction of the building is $8,000,000. Dolphin appropriately accounts for this contract under the completed-contract method in its financial statements and for income tax reporting. The building was deemed substantially completed on December 31, 2016. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to under this contract are shown below.
|
At December 31, 2014
|
At December 31, 2015
|
At December 31, 2016
|
|
Percentage of completion
|
20%
|
60%
|
100%
|
|
Contract costs incurred
|
$1,400,000
|
$4,920,000
|
$8,100,000
|
|
Estimated costs to complete the contract
|
$6,600,000
|
$3,280,000
|
-0-
|
|
Billings
|
$1,000,000
|
$4,500,000
|
$7,800,000
|
Instructions -
(a) Prepare schedules to compute the amount to be shown as "Cost of uncompleted contract in excess of related billings" or "Billings on uncompleted contract in excess of related costs" at December 31, 2014, 2015, and 2016. (Ignore income taxes.) Show supporting computations in good form.
(b) Prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore income taxes.) Show supporting computations in good form.