Share
Explore BrainMass

# Percentage of Completion Method for a Bridge

Howard Construction Co. contracted to build a bridge for \$3,000,000. Construction began in 2004 and was completed in 2005. Data relating to the construction are:

2004 2005
???????? ????????
Costs incurred \$990,000 \$825,000
Estimated costs to complete 810,000 ??

Howard uses the percentage-of-completion method.

INSTRUCTIONS
(a) How much revenue should be reported for 2004? Show your
computation.

(b) Make the entry to record progress billings of \$1,000,000 during
2004.

(c) Make the entry to record the revenue and gross profit for 2004.

(d) How much gross profit should be reported for 2005? Show your
computation.

#### Solution Preview

(a) To find out the revenue, we first calculate the percent complete. Percent complete = Costs incurred till date/Total cost to complete.
Cost incurred till date = 990,000
Total cost to complete the project = 990,000+810,000=1,800,000
Percent Complete = 990,000/1,800,000= 55%
Revenue in 2004 = 3,000,000X55%=1,650,000

(b) To record the progress billing, we debit the ...

#### Solution Summary

The solution explains the calculations under the percentage of completion method

\$2.19