This assignment is graded on the following:
Schedules are completed in totality for each year, with a profit/loss amount calculated for each year (6 points).
Appropriate use of Excel - Use of cell references for amounts if given in the problem data and use of formulas for all calculations (4 points).
Company Background Information:
On July 1, 2025, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2027, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2025, 2026, and 2027.
Instructions
a. Using the percentage-of-completion method, prepare a schedule to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2025, 2026, and 2027. (Ignore income taxes.)
b. Using the cost recovery method, prepare a schedule to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2025, 2026, and 2027. (Ignore income taxes.)
1. Schedules are completed in totality for each year, with a profit/loss amount calculated for each year (6 points). 2. Appropriate use of Excel - Use of cell references for amounts if given in the problem data and use of formulas for all calculations (4 points).
Company Background Information: On July 1, 2025, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2027, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2025, 2026, and 2027.
Solution:
Percent Revenue Costs Gross Estimated Total Complete To Recognized To Incurred To Total Contract Profit/Loss Year Costs Date Date Date Profit/Loss for the year 2025 2026 2027
7.
Total contract price
2,200,000
Revenue Revenue Gross Profit Costs incurred Costs Incurred Recognized In Recognized Gross Profit To Recognized in Year In Current Year To Date Current Year To Date Date Current Year 2025 2026 2027
b
At 12/31/25 At 12/31/26 At 12/31/27 300,000 $ 1,200,000 $ 2,100,000 1,200,000 800,000 300,000 1,100,000 800,000
Contract costs incurred to date Estimated costs to complete the contract Progress Billings to Gumbel during year
Instructions Using the percentage-of-completion method, prepare a schedule to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2025, 2026, and 2027. (Ignore income taxes.) Using the cost recovery method, prepare a schedule to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2025, 2026, and 2027. (Ignore income taxes.)
