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# Percentage-of-completion method and computation of GP

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Hello,

I keep getting confused on how to work this problem, can someone show me how to work this?

Problem:
A company uses the percentage-of-completion method of accounting. In 2007, The company began work on a contract it had received which provided for a contract price of \$15,000,000.

2007
Costs incurred during the year \$7,200,000
Estimated costs to complete as of December 31 4,800,000
Billings during the year 6,600,000
Collections during the year 3,900,000

What should be the gross profit recognized in 2007?

#### Solution Preview

Contract revenue \$15,000,000

Costs incurred during the year \$7,200,000 ...

#### Solution Summary

Contract revenue \$15,000,000

Costs incurred during the year \$7,200,000
Estimated costs to complete \$4,800,000
Total estimated contract costs \$12,000,000

Estimated profits \$3,000,000

Stage of completion 60%

Gross profit - 2007
Contract revenue \$9,000,000
Less: Contract costs \$7,200,000
Gross profit \$1,800,000

\$2.49