A Company Entered into a Contract to Construct a Building

question 101

Essay

A company entered into a contract to construct a building for a fee of $50,000. Construction began in 2006 and was completed in 2008. Transactions related to the contract are summarized below: $\begin{array} { | l | l | l | l | } \hline & 2006 & 2007 & 2008 \\\hline \text { Construction costs incurred to date } & \$ 8,000 & \$ 16,600 & \$ 15,900 \\\hline \text { Estimated costs to complete } & 32,000 & 16,400 & - 0 - \\\hline \text { Billings and collections during year } & 7,500 & 20,000 & 22,500 \\\hline\end{array}$ Compute the income that should be recognized each year using (a) the percentage-of-completion method and (b) the completed contract method.
[2006 | 2007 | 2008]
(a) $____________ $_______________ $______________
(b) $____________ $_______________ $______________

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Definitions:

Qualitative Quotas

Targets or goals set based on qualitative measures such as customer satisfaction or salesperson skill improvement, rather than purely numerical metrics.

Sales Calls

Outbound or inbound communications initiated by a salesperson to potential customers with the purpose of promoting and selling products or services.

Complexity

The state or quality of being intricate or complicated, often involving numerous interconnected parts.

Product Lines

A series of related products offered by a single company, often serving a similar market or purpose.