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:
Costs incurred $990,000 $825,000
Estimated costs to complete 810,000 ??
Howard uses the percentage-of-completion method.
(a) How much revenue should be reported for 2004? Show your
(b) Make the entry to record progress billings of $1,000,000 during
(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
(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 ...
The solution explains the calculations under the percentage of completion method