Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2013, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,000,000. Curtiss appropriately accounts for this contract under the completed contract method in its financial statements. The building was completed on December 31, 2015. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows: At 12-31-2013

At 12-31-2014

At 12-31-2015

Percentage of completion

10%

60%

100%

Costs incurred to date

$ 350,000

$2,500,000

$4,250,000

Estimated costs to complete

3,150,000

1,700,000

–0–

Billings to Axelrod, to date

720,000

2,170,000

3,600,000

Required:

1. Prepare schedules to compute gross profit or loss to be recognized as a result of this contract for each of the three years.

2. Assuming Curtiss uses the percentage-of-completion method of accounting for long-term construction contracts, compute gross profit or loss to be recognized in each of the three years.

3. Assuming the percentage-of-completion method, compute the amount to be shown in the balance sheet at the end of 2013 and 2014 as either cost in excess of billings or billings in excess of costs.