Question:
In 2013, Long Construction Corporation began construction work under a three-year contract. The
contract price is $1,600,000. Long uses the percentage-of-completion method for financial reporting
purposes. The financial statement presentation relating to this contract at December 31, 2013, is as
follows:
Required:
1. What was the cost of construction actually incurred in 2013?
2. How much cash was collected in 2013 on this contract?
3. What was the estimated cost to complete as of the end of 2013?
4. What was the estimated percentage of completion used to calculate income in 2013?
Answer:
Requirement 1
Construction in progress = Costs incurred + Profit recognized
$100,000 = ? + $20,000
Actual costs incurred in 2013 = $80,000
Requirement 2
Billings = Cash collections + Accounts receivable
In 2013, Long Construction Corporation began construction work under a three-year contract. The
contract price is $1,600,000. Long uses the percentage-of-completion method for financial reporting
purposes. The financial statement presentation relating to this contract at December 31, 2013, is as
follows:
Required:
1. What was the cost of construction actually incurred in 2013?
2. How much cash was collected in 2013 on this contract?
3. What was the estimated cost to complete as of the end of 2013?
4. What was the estimated percentage of completion used to calculate income in 2013?
Answer:
Requirement 1
Construction in progress = Costs incurred + Profit recognized
$100,000 = ? + $20,000
Actual costs incurred in 2013 = $80,000
Requirement 2
Billings = Cash collections + Accounts receivable
