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Percentage-of-completion method

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Jacks Contractors received a contract to construct a mental health facility for $2,500,000.

Construction was begun in 2005 and completed in 2006. Cost and other data are presented below:
2005 2006
Costs incurred during the year $1,500,000 $1,300,000
Remaining estimated costs to complete 1,200,000 0
Billings during the year 1,200,000 1,300,000
Cash collections during the year 1,000,000 1,500,000

Assume that Jacks uses the percentage-of-completion method for revenue recognition.

Compute the amount of gross profit recognized during 2005 and 2006.

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The costs incurred are 1,500,000 and the total cost to complete the project are ...

Solution Summary

The solution explains the calcuation of gross profit under the percentage of completion method