Reference no: EM13585783

At 12/31/20B, Longhorn Construction Company provided the following information regarding its only long-term contract:

                                                                                  20B                    20A

Cash collected from customer during the year     $   420                   $   340

Costs incurred during the year                                  466                        408

Contract billings during the year                               460                        380

Gross profit (loss) on this contract for the year         (66)                        192

The total contract price is $2,000.

Construction began during 20A, and management expects to complete the project in year 20C.

Profit is recognized according to the "percentage of completion method."

REQUIRED:

a.   Percentage of work completed by the end of 20A                                                          %

b.   Percentage of work completed by the end of 20B                                                          %

c.   Accounts Receivable balance at 12/31/20B:

                                                                                                                  $                            

d.   Balance sheet description, amount, and classification of Construction in Progress (less appropriate contra accounts, if any) at 12/31/20B:

__________________________________________________ . . . . . . . $                        

Description                                                                                         Amount

Current asset         Current Liability         Noncurrent Asset         Noncurrent Liability

Classification:         Circle one

IS3: Discontinued Operations

In 2002, the Kerr-Graham Corporation operated two divisions: cooking utensils and herb gardens. In 2002, Kerr-Graham's operating profits totaled $2,000,000. The cooking utensils division earned $1,500,000, and the herb gardens division earned $500,000.

On September 15, 2003, the company adopted a plan to sell the assets of the herb garden division. In 2003, the herb garden division incurred operating losses of $300,000 from the beginning of the year to September 15, and $90,000 from September 16 through December 31. Management expects to operate the herb garden division for a $75,000 loss during the first half of 2004 and to sell the division for a profit of $50,000 in mid-2004. Kerr-Graham's 2003 income from the cooking utensils division was $1,750,000.

Prior to its sale in mid-2004, the herb garden division lost only $55,000. The actual sale was effected on May 15, 2004, at a profit of $60,000. The cooking utensils division 2004 earnings were $2,250,000.

All numbers are stated net of appropriate tax effects. That is, you can ignore tax effects for this problem.

Required:

Complete Kerr-Graham's summary income statement for 2004, 2003, 2002 beginning with "income from continuing operations." An answer sheet is provided below. Show calculations.