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    Long-Term Contract with Overall Loss

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    P18-7 (Long-Term Contract with an Overall Loss) On July 1, 2007, Kyung-wook Construction Company
    Inc. contracted to build an office building for Mingxia Corp. for a total contract price of $1,950,000.
    On July 1, Kyung-wook estimated that it would take between 2 and 3 years to complete the building. On
    December 31, 2009, the building was deemed substantially completed. Following are accumulated contract
    costs incurred, estimated costs to complete the contract, and accumulated billings to Mingxia for
    2007, 2008, and 2009.
    At 12/31/07 At 12/31/08 At 12/31/09
    Contract costs incurred to date $ 150,000 $1,200,000 $2,100,000
    Estimated costs to complete the contract 1,350,000 800,000 -0-
    Billings to Mingxia 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, 2007, 2008, and 2009.
    (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 2007, 2008, and 2009. (Ignore
    income taxes.)

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    https://brainmass.com/business/business-law/long-term-contract-overall-loss-242195

    Solution Preview

    P18-7 (Long-Term Contract with an Overall Loss) On July 1, 2007, Kyung-wook Construction Company
    Inc. contracted to build an office building for Mingxia Corp. for a total contract price of $1,950,000.
    On July 1, Kyung-wook estimated that it would take between 2 and 3 years to complete the building. On
    December 31, 2009, the building was deemed substantially completed. Following are accumulated contract
    costs incurred, estimated costs to complete the contract, and accumulated billings to Mingxia for
    2007, 2008, and 2009.
    At At At
    12/31/07 12/31/08 12/31/09
    Contract costs incurred to date $ 150,000 $1,200,000 $2,100,000
    Estimated costs to complete the contract 1,350,000 800,000 -0- ...

    Solution Summary

    The long-term contract with overall loss is examined for Kyung-wook Construction Company, Inc. The estimated cost to complete a contract is determined.

    $2.19

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