Percentage of Completion
Response to the following problem:
The King Construction Company began work on a contract in 2010. The contract price is $4,000,000, and the company uses the percentage-of-completion method. Other information relating to the contract is as follows:
2010
Costs incurred during the year $ 800,000
Estimated costs to complete, December 31 2,400,000
Billings during the year 600,000
Collections during the year 400,000
Required
1. How much gross profit or loss does King recognize in 2010?
2. Prepare the appropriate sections of the 2010 income statement and ending balance sheet.