Question: (Recognition of Profit and Balance Sheet Presentation, Percentage-of-Completion) On February 1, 2014, Hewitt Construction Company obtained a contract to build an athletic stadium. The stadium (for a local high school) was to be built at a total cost of $5,400,000 and was scheduled for completion by September 1, 2016. One clause of the contract stated that Hewitt was to deduct $15,000 from the $6,600,000 billing price for each week that completion was delayed. Completion was delayed 6 weeks, which resulted in a $90,000 penalty. Below are the data pertaining to the construction period.
(a) Using the percentage-of-completion method, compute the estimated gross profit recognized in the years 2014-2016.
(b) Prepare a partial balance sheet for December 31, 2015, showing the balances in the receivables and inventory accounts.