The board of directors of Ogle Construction Company is meeting to choose between the completed-contract method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Ogle's controller in the preparation of a presentation to be given at the board meeting. The controller provides you with the following information:

1. Ogle commenced doing business on January 1, 2018.

2. Construction activities for the year ended December 31, 2018, were as follows:

Total Contract Billings Through Cash Collections

Project Price 12/31/18 Through 12/31/18

A $500,000 $340,000 $310,000

B 720,000 210,000 210,000

Contract Costs Estimated

Incurred Through Additional Costs to

Project 12/31/18 Complete Contracts

A $424,000 $101,000

B 195,000 455,000

3. Each contract is with a different customer.

4. Any work remaining to be done on the contracts is expected to be completed in 2019.

Instructions

(a) Prepare a schedule by project, computing the amount of income (or loss) before selling, general, and administrative expenses for the year ended December 31, 2018, which would be reported under:

(1) The completed-contract method.

(2) The percentage-of-completion method (based on estimated costs).

(b) Prepare the general journal entry(ies) to record revenue and gross profit on project B (second project) for 2018, assuming that the percentage-of-completion method is used.

(c) Indicate the balances that would appear in the balance sheet at December 31, 2018 for the following accounts for Project A, assuming that the percentage-of-completion method is used.

• Accounts Receivable
• Billings on Construction in Process
• Construction in Process

(d) How would the balances in the accounts discussed in part (c) change (if at all) for Project B, if the completed-contract method is used?