Reference no: EM132939082
Felicia Company entered into a long-term construction contract in January 1, 2017 to construct a building at a fixed price of $10,000,000. Felicia determined that the outcome of the construction cannot be estimated reliably. Felicia normally bills its customers 50% at the middle of the first year, 20% at the middle of the second year and the balance at the date of completion of project. A mobilization fee of 10% of the contract price (deductible from the final bill) is payable 30 days after the contract signing. The contract provides that the customer shall pay 80% of the amount billed during the year on or before December 31 subject to retention provision/withholding by customer of 5% of amount to be paid by the customer, which is intended to protect the customer from the contractor failing to adequately complete its obligation under the contract. The customer satisfactorily complied with the contractual provision.
Felicia's accountant provide the following data for the years ended December 31, 2017 and 2018:
2017 2018
Cost incurred to date $4,000,000 $7,000,000
Estimated cost to complete as of this date 9,000,000 4,000,000
Problem 1: What is the December 31, 2018 (1) Due from/(to) Customer, (2) excess of construction in progress over progress billings and (3) realized gross profit/(loss), respectively?
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