Reference no: EM132942471

Construction ContractsWinter Company constructs office buildings in Ellensburg. It began a $50,000,000, 3-year contract on January 1, 2018. The following information is available regarding this contract.

                                                                2018                                2019                         2020

Costs incurred during current year   $ 12,000,000               $ 20,000,000        $ 13,000,000

Estimated costs to complete at year end  28,000,000               10,000,000              0

Progress billings during year                     10,000,000               18,000,000           22,000,000

Collections on billings during year             8,000,000              17,000,000             25,000,000

Required:

Problem a. Assuming Winter uses the percentage-of-completion method, calculate the gross profit to be recognized in 2018 and 2019.

Problem b. Assuming Winter uses the percentage-of-completion method, indicate how the contract would be presented on Winter's income statement for the year ended December 31, 2019.

Problem c. Assuming Winter uses the completed-contract method, calculate the gross profit to be recognized in 2020.

Problem d. Assuming Winter uses the completed-contract method, indicate how the contract would be presented on Winter's balance sheet (Accounts Receivable and Construction-in-process) for the year ended December 31, 2019.

Problem e. Assuming Winter uses the completed-contract method and billings in 2019 are $40,000,000 instead of $18,000,000, what will be the effect on the balance sheet in 2019?