Problem:
On July 1, 2004, Kim Kyung-wook Construction Company Inc. contracted to build an office building for Fu Mingxia Corp. for a total contract price of $1,950,000. On July 1, Kyung-wook estimated that it would take between 2 and 3 years to complete the building. On December 31, 2006, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Mingxia for 2004, 2005, and 2006.
At 12/31/04 At 12/31/05 At 12/31/06
Contract costs $ 150,000 $1,200,000 $2,100,000
incurred to date
Estimated costs to 1,350,000 800,000 -0-
complete the contract
Billings to Mingxia 300,000 1,100,000 1,850,000
Instructions:
Q1. Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2004, 2005, and 2006. (Ignore income taxes.)
Q2. Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for?