Reference no: EM132589730

On June 1, 2020, Roman Construction Company Inc. contracted to build an office building for Sicily Corp. for a total contract price of $2,600,000. On July 1, Roman estimated that it would take between 2 and 3 years to complete the building. On December 31, 2022, the building was deemed substantially completed.

Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Sicily 2020, 2021, and 2022:

                                                                          At                             At                           At

                                                    12/31/2020              12/31/2021             12/31/2022

Contract costs incurred during the year   $ 600,000           $ 1,500,000                   $ 2,750,000

Estimated costs to complete the contract   1,800,000            1,200,000                  -

Billings to Sicily                                        400,000                1,200,000                2,400,000

Instructions:

Question (a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2020, 2021, and 2022. (Ignore income taxes.)

Question (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 31, 2020, 2021, and 2022. (Ignore income taxes.)