A Construction Company contracted to build a parking garage for $3,000,000. Construction began on January 1, 2008 and was completed December 31, 2010. Harpley has a 12/31 fiscal year end. Data related to the contract is summarized below:
2008... 2009... 2010
Costs incurred during the year: (paid cash) 700,000.. 980,000... 1,350,000
Estimated costs to complete as of 12/31: 1,800,000... 1,400,000... 0
Billings during the year: 900,000... 1,100,000... 1,000,000
Cash collections during the year: 800,000... 1,200,000... 1,000,000
Assuming that Harpley uses the percentage-of-completion method of accounting for long-term contracts, use the above information to answer the questions below
A. On the 2008 balance sheet, what is the appropriate balance in the Construction in Process (CIP) Inventory account? (2 pts)
$_____________
B. At the end of 2009, Harpley will record what amount in the Construction Expense account (round to the nearest dollar)? (2 pts)
$____________
C. What amount of gross profit on the long-term contract will Harpley report in 2008, 2009, and 2010?
Gross Profit on LT
contract
D. At the completion of the project, Harpley evaluates whether its negotiated contract price (of $3,000,000) was appropriate, given its expenses. They typically like to earn a 20% gross profit rate on any new project. What is the total profit/loss on this project (if loss please put parentheses around the amount)? (1 pt)
$____________