Percentage-of-completion method and computation of GP
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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?
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Solution Summary
Please find the solution below:
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
Solution Preview
Contract revenue $15,000,000
Costs incurred during the year $7,200,000 ...
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