Acc421 Intermediate Accounting: W3-T2 KDH Construction Company

Acc421 Intermediate Accounting

W3-T2 Long-Term Contract with Overall Loss (Chapter 18)
On July 1, 2008, KDH Construction Company, Inc. contracted to build an office building for Trousdale Corp. for a total contract price of $2,300,000. On July 1, KDH estimated that it would take between 2 and 3 years to complete the building. On December 31, 2010, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Trousdale Corp. for 2008, 2009 and 2010.
At 12/31/2008 At 12/31/2009 At 12/31/2010
Contract costs incurred to date $200,000 $1,500,000 $2,450,000
Estimated costs to complete the contract ,800,000 900,000 -
Billings to Trousdale 600,000 1,300,000 2,200,000

Instructions:
(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss be recognized as a result of this contract for the years ended December 31, 2008, 2009, and 2010. (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 2008, 2009, 2010. (Ignore income taxes.)
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