Purchase Solution

# This addresses the Torvill Construction Company exercise.

Not what you're looking for?

On July 1, 2010, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of \$1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2012, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2010, 2011, and 2012.

At At At
12/31/10 12/31/11 12/31/12
Contract costs incurred to date \$ 300,000 \$1,200,000 \$2,100,000
Estimated costs to complete the
contract 1,200,000 800,000 -0-
Billings to Gumbel 300,000 1,100,000 1,850,000

Instructions
(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012.(Ignore income taxes.)

(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)

##### Solution Summary

This solution answers the two following questions for Torvill Construction Company based on the information given in the scenario:

(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012.(Ignore income taxes.)

(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)

##### Solution Preview

Help with your homework study problem:
(A)

Percentage of completion method for 2010 profit:

Costs to current 300,000
Costs needed to complete project 1,200,000
Total costs 1,500,000
Percentage completed = 300,000/1,500,000 20%
Revenue = 1,900,000 x 20% 380,000
Costs 300,000
2010 profit = ...

##### Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

##### MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

##### Introduction to Finance

This quiz test introductory finance topics.

##### Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

##### Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.