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Accounting-Financial Reporting 1?

Question 2: (2 points) Exercise 5-14 Percentage-of-completion method; solve for unknowns LO4 In 2009, Long Construction Corporation began construction work under a three-year contract. The contract price is $1,620,000. Long uses the percentage-of-completion method for financial reporting purposes. The financial statement presentation relating to this contract at December 31, 2009, is as follows: Balance Sheet Accounts Receivable (from construction progress billings) $32,000 Construction in Progress $105,000 Less: Billings on Construction Contract (95,000) Cost of Uncompleted Contracts in Excess of Billings 10,000 Income statement Income (before tax) on the contract recognized in 2009 $25,000 Required: What was the cost of construction actually incurred in 2009? How much cash was collected in 2009 on this contract? What was the estimated cost to complete as of the end of 2009? What was the estimated percentage of completion used to calculate income in 2009? Round percentage of completion to 2 decimal places, all other answers to nearest whole number. Omit the "$" and "%" sign in your response. 1. Actual costs incurred in 2009 = $ 2. Cash collections in 2009 = $ 3. Estimated cost to complete = $ 4. Estimated percentage of completion used to calculate income = %

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1. 1. Construction in progress = Costs incurred + Profit recognized $105,000 = ? + $25,000 Actual costs incurred in 2009 = $80,000 2. Billings = Cash collections + Accounts Receivable $95,000 = ? + $32,000 Cash collections in 2009 = $63,000 3. Let A = Actual cost incurred + Estimated cost to complete Actual cost incurred/A x (Contract price - A) = Profit recognized $80,000/A x ($1,620,000 - A) = $25,000 $129,600,000,000 - 80,000A = $25,000A $105,000A = $129,600,000,000 A = $1,234,285 Estimated cost to complete = $1,234,285 - 80,000 = $1,154,285 4. 80,000/1,234,285 = 6.48%