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Middle Co: Extraord item, % completion, completed contract

VII. Use following info for Middle company:
- sales account included an $800,000 (net of tax) loss due to flood destroying a facility, never happened before.
- the account gain/loss from sale of investment included the selling of a small division (a segment of Giant) for $4 million. prior to sale the division had generated income of $1 million.
Income from operating activities is $1.6 million and tax rate is 40%. how do you treat these two events in balance sheet or income statement. show calculation.
VIII. Consider following for a construction contract.
The construction begun at Jan 1 2010. Contract price: $18,000,000.
Cost for 2010: 3.2 million, cost for 2011: 5,760,000, cost for 2012: 3,840,000 (these costs are discrete)
Estimated costs to complete as of the end of 2010 is 10,800,000 , estimated cost to complete as of the end of 2011 is $4,000,000.
Billing to company in 2010 was 3,000,000 for 2011 was $5,000,000 with the remaining billing during 2012
Requirement: prepare a schedule showing the effect on the income statement and balance sheet under the percentage -of- completion vs. the completed contract method. Prepare the entries that would have been made for each of three years under both methods.

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Your tutorial attached discusses which is an extraordinary item and which is not and creates a ...

Solution Summary

Your tutorial attached discusses which is an extraordinary item and which is not and creates a partial income statement to show how these would be reported. Schedules are shown to compute all the needed amounts for percentage of completion and completed contract methods and to show the income statement, balance sheet, closing entries and journal entries for the full three year period of the contract.

$2.19