Acc421 Intermediate Accounting: Week 3 Team Assignment P18-7 On July 1, 2012, Torvill Construction

Acc421 Intermediate Accounting
Week 3 Team Assignment

P18-7 (Long-term Contract with an Overall Loss)
On July 1, 2012, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2014, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2012, 2013, and 2014.

At 12/31/12 At 12/31/13 At 12/31/14
Contract costs incurred to date 300,000 1,200,000 2,100,000
Estimated costs to complete the contract 1,200,000 800,000 -
Billings to Gumbel 300,000 1,100,000 1,850,000

Instructions:
a. 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, 2012, 2013, 2014. (Ignore income taxes).
b. Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2012, 2013, and 2014 (Ignore income taxes).
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