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    Recognition of Profit for Long-Term Contracts

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    Recognition of Profit for Long-Term Contracts

    Andre Agassi Construction Co began operations January 1, 2008. During the year, Agassi entered into a contract with Lindsey Davenport Corp. to construct a manufacturing facility. At the time, Agassi estimated that it would take 5 years to complete the facility at a total cost of $4,500,000. The total contract price for construction of the facility is $6,300,000. During the year, Agassi incurred $1,185,800 in construction costs related to the construction project. The estimated cost to complete the contract is $6,204,200. Lindsey Davenport Corp. was billed and paid 30% of the contract price.

    Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2008, under each of the following methods.

    (a) Completed-contract method
    (b) Percentage-of-completion method

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    https://brainmass.com/business/accounting/recognition-of-profit-for-long-term-contracts-372423

    Solution Summary

    The process is laid out in excel with formulas so you have a template for other problems like this.

    $2.19

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