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. Balance Sheet Accounts receivable-construction contract billings $18,000 Construction in process $65,000 Less: Contract billings 61,500 Cost of uncompleted contract in excess of billings 3,500 Income Statement Income (before tax) on the contract recognized in 2012 $19,500 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.