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(Solution Download) Acc423-Mauer Construction Company, Inc., entered into a firm fixed-price contract with Trillini...

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Completed-Contract Method

 

 

 

 

 

 

Mauer Construction Company, Inc., entered into a firm fixed-price contract with Trillini Clinic on July 1, 2005, to construct a four-story office building.

 

At that time, Mauer estimated that it would take between 2 and 3 years to complete the project. The total contract price for construction of the building

 

is $4,500,000. Mauer appropriately accounts for this contract under the completed-contract method in its financial statements and for income tax reporting.

 

The building was deemed substantially completed on December 31, 2007.

 

 

 

 

 

Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to the Trillini

 

Clinic under the contract are shown below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2005

 

 

 

 

 

 

At December 31, 2006

 

 

 

 

 

 

At December 31, 2007

 

 

 

 

 

 

Percentage of completion

 

 

 

 

 

 

30%

 

 

 

 

 

 

65%

 

 

 

 

 

 

100%

 

 

 

 

 

 

Contract costs incurred

 

 

 

 

 

 

1140000

 

 

 

 

 

 

3,055,000

 

 

 

 

 

 

4,800,000

 

 

 

 

 

 

Estimated costs to complete contract

 

 

 

 

 

 

2660000

 

 

 

 

 

 

1,645,000

 

 

 

 

 

 

 

- Billings to Trillini Clinic

 

 

 

 

 

 

 

 

1500000

 

 

 

 

 

 

2,500,000

 

 

 

 

 

 

4,300,000

 

 

 

 

 

 

 

 

 

 

Required:

 

 

 

 

 

a. Prepare schedules to compute the amount to be shown as "Cost of uncompleted contract in excess of related billings" or "Billings on uncompleted contract

 

in excess of related costs" at December 31, 2005, 2006, and 2007. Ignore income taxes. Show supporting computations in good form.

 

 

 

 

 

b. Prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2005, 2006, and 2007.

 

Ignore income taxes. Show supporting computations in good form.

 

 

 

 







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