Question:
Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July
1, 2013, to construct a four-story office building. At that time, Curtiss estimated that it would take
between two and threeyears to complete the project. The total contract price for construction of the
building is $4,000,000. Curtiss appropriately accounts for this contract under the completed contract
method in its financial statements. The building was completed on December 31, 2015. Estimated
percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract,
and accumulated billings to Axelrod under the contract were as follows:
Required:
1. Prepare schedules to compute gross profit or loss to be recognized as a result of this contract for each
of the three years.
2. Assuming Curtiss uses the percentage-of-completion method of accounting for long-term construction
contracts, compute gross profit or loss to be recognized in each of the three years.
3. Assuming the percentage-of-completion method, compute the amount to be shown in the balance sheet
at the
end of 2013 and 2014 as either cost in excess of billings or billings in excess of costs.
Answer:
Requirement 1
2013 2014 2015
Contract price $4,000,000 $4,000,000 $4,000,000
Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July
1, 2013, to construct a four-story office building. At that time, Curtiss estimated that it would take
between two and threeyears to complete the project. The total contract price for construction of the
building is $4,000,000. Curtiss appropriately accounts for this contract under the completed contract
method in its financial statements. The building was completed on December 31, 2015. Estimated
percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract,
and accumulated billings to Axelrod under the contract were as follows:
Required:
1. Prepare schedules to compute gross profit or loss to be recognized as a result of this contract for each
of the three years.
2. Assuming Curtiss uses the percentage-of-completion method of accounting for long-term construction
contracts, compute gross profit or loss to be recognized in each of the three years.
3. Assuming the percentage-of-completion method, compute the amount to be shown in the balance sheet
at the
end of 2013 and 2014 as either cost in excess of billings or billings in excess of costs.
Answer:
Requirement 1
2013 2014 2015
Contract price $4,000,000 $4,000,000 $4,000,000
