Percentage-of-completion accounting
Not what you're looking for?
Calculate the gross profit using the percentage-of-completion method for revenue recognition.
(See attached file for full problem description)
The Construction Company was the low bidder on the office building construction contract. The contract bid was $7,000,000, with an estimated cost to complete the project of $6,000,000. The contract period was 34 months starting January 1, 2004. The company uses the cot-to-cost method of estmating earnings. Because of changes requested by the customer, the contract price was adjusted downward to $6,700,000 on January 1, 2005.
Construction activities for the years 2004-2007 as follows:
Year Actual cost -Current Year Progress Billings Cash Receipts
2004 2,500,000 2,100,000 1,800,000
2005 3,300,000 3,100,000 3,000,000
2006 410,000 1,300,000 1,000,000
2007 700,000
The estimated cost to complete the contract as of the end of each accounting period is:
2004 3,500,000
2005 400,000
2006 0
Calculate the gross profit for the years 2004-2006 under the percentage-of-completion method of revenue recognition.
Purchase this Solution
Solution Summary
The solution explains the calculation of gross profit using the percentage of completion method
Solution Preview
The steps in percentage of completion are:
1. Costs incurred to date /Most recent estimated total costs= ...
Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Lean your Process
This quiz will help you understand the basic concepts of Lean.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.