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Gurney Construction Company

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Recognition of Profit, Percentage-of-Completion In 2010 Gurney Construction Company agreed to construct an apartment building at a price of $1,200,000. The information relating to the costs and billings for this contract is shown below.







(a) Assuming that the percentage-of-completion method is used, (1) compute the amount of gross profit to be recognized in 2010 and 2011, and (2) prepare journal entries for 2011.

(b) For 2011, show how the details related to this construction contract would be disclosed on the balance sheet and on the income statement.

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Gurney Construction Company

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Sheet1

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxx of Profit, Percentage-of-Completion In xxxx xxxxxx Construction xxxxxxx agreed to xxxxxxxxx an xxxxxxxxx building xx x xxxxx xx $1,200,000. 
The xxxxxxxxxxx relating to xxx xxxxx xxx xxxxxxxx for xxxx contract is xxxxx xxxxxx
xxx xxxxxxxx xxxx the xxxxxxxxxxxxxxxxxxxxxxxx xxxxxx is used, xxx xxxxxxx xxx xxxxxx of xxxxx xxxxxx to xx xxxxxxxxxx xx 2010 and 2011, and xxx prepare journal entries xxx 2011.
xxx xxxxxxxx xxxx the percentage-of-completion method is used, xxx compute the amount xx gross xxxxxx xx xx xxxxxxxxxx in 2010 and xxxxx and (2) prepare xxxxxxx xxxxxxx xxx 2011.
xxxxxxxxxxx2010 2011 xxxx
xxxxxxxx price x 1,200,000 * 1,200,000x 1,200,000
Actual Cost xxxxxxxx to xxxx * 600,000x xxxxxxx x 540,000
xxx xxxxxxxxx xxxx xxx to incur* 1,400,000x xxxxxxxxxx
xxxxx xxxxxxxxx xxxx * xxxxxxxxx* xxxxxxxxx x xxxxxxx
Estimated Gross xxxxxx (Loss)x xxxxxxxxxx xxxxxx * xxxxxxx
xxxxxxxxxx of Completion* xx x * 1
Total xxxxx (Loss xxxxxxx xxxxxxxxxx x (240,000)x xxxxxx* xxxxxxx
xxxx gross xxxxxx xxxxxxxxx xx xxxxxxxx yearxxx* xxxxxxx x xxxxxxxx
xxxxx xxxxxx xx xxxx xxxxxxxxxx xx xxxxxxx xxxx * xxxxxxxxxx 273,103* xxxxxxx
Journal xxxxxxx
Construction in xxxxxxx x xxxxxxx
Cash x materials , payables xxxx x 960,000
xxxxxxxx Receivable* 950,000
xxxxxxxx xx xxxxxxxxxxxx xx Process * 950,000
Cash x 1,000,000
xxxxxxxx xxxxxxxxxxx 1,000,000
Construction In xxxxxxx* 273,103
Construction expenses x 960,000
Revenue xxxx xxxxxxxxxxxx Contractsx xxxxxxxxx
(b) xxx xxxxx show how the xxxxxxx related xx xxxx construction contract would xx disclosed on xxx balance xxxxx and xx the income statement.
xxxxxx xxxxxxxxx
xxxxxxx from xxxxxxxxxxxx Contracts * xxxxxxxxx
xxxx Construction xxxxxxxx* xxxxxxxxx
Gross xxxxxx xx xxxx xxxx xxxxxxxxxx xxxxxxx
Balancesheet
xxxxxxx assets:
xxxxxxxx receivablex 50,000
Inventories:

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