Gross Income Statement
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Question: What is the cash collected in 2007 and the estimated income on the construction contract?
Johnson Builders began construction work under a three-year contract at a price of $7,525,000. The firm uses the percentage of completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to the total estimated costs for completing the contract. The financial statement presentations relating to this contract on Dec. 31,2007 are
balance Sheet
account receivable $150,000
Construction in progress $602,000
Less progress billings $562,000 $40,000Income statement
Gross profit on construction contracts $301,000
Answer: Contract costs incurred….xxx
Recognized profit/loss……xxx
Less: Progress billings….(xxx)
Due from customers…….. xxxIf we fill in the blanks, we find that:
Progress billings $562,000
Due from Customers $150,000
Less profit recognized $301,000
Contract costs incurred $411,000Cash collected $562,000 – $150,000 = $412,000
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The Balance Sheet
