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Problem 18-11 On July 1, 2017, Nash Construction Company Inc. contracted to build an office building for...

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Accounting

Problem 18-11

On July 1, 2017, Nash Construction Company Inc. contracted tobuild an office building for Gumbel Corp. for a total contractprice of $1,890,000. On July 1, Nash estimated that it would takebetween 2 and 3 years to complete the building. On December 31,2019, the building was deemed substantially completed. Followingare accumulated contract costs incurred, estimated costs tocomplete the contract, and accumulated billings to Gumbel for 2017,2018, and 2019.

At
12/31/17

At
12/31/18

At
12/31/19

Contract costs incurred to date$312,900$1,148,400$2,076,000
Estimated costs to complete the contract1,177,100831,600–0–
Billings to Gumbel300,0001,090,0001,850,000


(a) Using the percentage-of-completion method,prepare schedules to compute the profit or loss to be recognized asa result of this contract for the years ended December 31, 2017,2018, and 2019. (Ignore income taxes.) (If answer is 0,please enter 0. Do not leave any field blank. Enter negativeamounts using either a negative sign preceding the number e.g. -45or parentheses e.g. (45).)

Answer & Explanation Solved by verified expert
3.6 Ratings (564 Votes)

Computation of Recognizable Profit/Loss Completed-Contract Method:
2017 none
2018
Cost to date 31-12-2018               1,148,400
estimated cost to complete                  831,600
Estimated total cost               1,980,000
Deduct contract price               1,890,000
Profit to be recognized in 2018                     90,000
2019
Total costs recognized               2,076,000
Total revenue recognized               1,890,000
Total Profit on contract                  186,000
Deduct profit recognized in 2018                     90,000
Profit recognized in 2019                     96,000

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