long-term_contracts_solution

long-term_contracts_solution - 2011 and 2012 under the...

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Solution : Long-term construction contracts The Calder Company is engaged in the construction of a dam that takes 3 years to complete. The costs incurred to date, estimated costs to complete, and collections are shown below: 2008 2009 2010 Actual costs incurred 100,000 186,000 314,000 Estimated costs to complete 400,000 264,000 -- Collections from customer 50,000 330,000 320,000 Total contract price is $700,000. The company estimates the percent complete by the cost-to-cost method (cumulative costs/total costs). 1. What amount of income (or loss) should Calder report on their tax return in 2010, 2011 and 2012 under the completed contract method? COMPLETED CONTRACT METHOD Computations 2010 2011 2012 Is contract 100% complete? no no yes Percent of revenue recognized 0% 0% 100% Tax return 2010 2011 2012 Construction revenues 700,000 Construction expenses (600,000) Gross profit 100,000
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2. What amount of income (or loss) should Calder report on their tax return in 2010,
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Unformatted text preview: 2011 and 2012 under the percentage of completion method? PERCENTAGE-OF-COMPLETION METHOD 2010 2011 2012 Actual costs incurred 100,000 186,000 314,000 Estimated costs to complete 400,000 264,000 Collections from customer 50,000 330,000 320,000 Computations 2010 2011 2012 Actual costs (cumulative) 1 100,000 286,000 600,000 Estimated costs to complete 400,000 264,000 Total costs 2 500,000 550,000 600,000 Contract price 700,000 700,000 700,000 Percent complete (1 divided by 2 (above)) 20% 52% 100% Cumulative revenue recognized 140,000 364,000 700,000 Revenue recognized prior periods 0 (140,000) (364,000) Revenue recognized current period 140,000 224,000 336,000 Tax return 2010 2011 2012 Construction revenues 140,000 224,000 336,000 Construction expenses (current period) (100,000) (186,000) (314,000) Gross profit 40,000 38,000 22,000...
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This note was uploaded on 09/09/2011 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.

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long-term_contracts_solution - 2011 and 2012 under the...

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