E18-15B (Recognition of Loss, Percentage-of-Completion)In 2014 Norcraft Sisters Construction agreed to construct a residence hall at University of the North at a price of $8,500,000. The information relating to the costs and billings for this contract is

E18-15B (Recognition of Loss, Percentage-of-Completion)In 2014 Norcraft Sisters Construction agreed to construct a residence hall at University of the North at a price of $8,500,000. The information relating to the costs and billings for this contract is shown below.

                                                              2014                      2015                     2016            

Costs incurred to date                     $ 800,000             $4,050,000            $8,950,000

Estimated costs yet to be incurred  7,200,000                4,950,000                   –0–

Customer billings to date                   500,000                4,000,000             8,500,000

Collection of billings to date               200,000                3,200,000            8,000,000

Instructions

(a) Assuming that the percentage-of-completion method is used, (1) compute the amount of gross profit to be recognized in 2014 and 2015, and (2) prepare journal entries for 2015.

(b) For 2015, show how the details related to this construction contract would be disclosed on the balance sheet and on the income statement.