Bryan followed in his father’s footsteps and entered into the carpet business. he owns and operates i do carpet (idc). bryan prefers to install carpet only, but in order to earn additional revenue, he also cleans carpets and sells carpet-cleaning supplies.

a. idc contracted with a homebuilder in december of last year to install carpet in 10 new homes being built. the contract price of $92,000 includes $54,800 for materials (carpet). the remaining $37,200 is for idc’s service of installing the carpet. the contract also stated that all money was to be paid up front. the homebuilder paid idc in full on december 28 of last year. the contract required idc to complete the work by january 31 of this year. bryan purchased the necessary carpet on january 2 and began working on the first home january 4. he completed the last home on january 27 of this year.

b. idc entered into several other contracts this year and completed the work before year-end. the work cost $178,000 in materials. bryan billed out $244,800 but only collected $220,000 by year-end. of the $24,800 still owed to him, bryan wrote off $4,200 he didn’t expect to collect as a bad debt from a customer experiencing extreme financial difficulties.