(a) Gross profit recognized in:
2012 2013 2014
Contract price $3,000,000 $3,000,000 $3,000,000
Costs:
Costs to date $ 600,000 $1,560,000 $2,100,000
Estimated costs to complete 1,400,000 2,000,000 520,000 2,080,000 0 2,100,000
Total estimated profit 1,000,000 920,000 900,000
Percentage
completed to date X 30%* X 75%** X 100%
Total gross profit recognized 300,000 690,000 900,000
Less: Gross profit recognized in previous years 0 300,000 690,000
Gross profit recognized in current year $ 300,000 $ 390,000 $ 210,000
**$600,000 ÷ $2,000,000
**$1,560,000 ÷ $2,080,000
(b) Construction in Process
($2,100,000 – $1,560,000)............................................... 540,000
Materials, Cash, Payables. ................................... 540,000
Accounts Receivable ($3,000,000 – $2,000,000)..... 1,000,000
Billings on Construction in Process ................. 1,000,000
Cash ($2,850,000 – $1,950,000) .................................... 900,000
Accounts Receivable.............................................. 900,000
Construction Expenses.................................................. 540,000
Construction in Process ................................................ 210,000
Revenue from Long-Term Contracts ................ 750,000*
*$3,000,000 X (100% – 75%)
Billings on Construction in Process.......................... 3,000,000
Construction in Process ....................................... 3,000,000
18-44 Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only)
PROBLEM 18-3 (Continued)
(c) CHANCE COMPANY
Balance Sheet (Partial)
December 31, 2013
Current assets:
Accounts receivable
($2,000,000 – $1,950,000) ................................ $ 50,000
Inventories
Construction in process
($1,560,000 + $690,000)........................... $2,250,000
Less: