On April 1 2014 Lisboa Limited entered into a cost plus fixed
On April 1, 2014, Lisboa Limited entered into a cost-plus-fixed fee contract to manufacture an electric generator for Martinez Corporation. At the contract date, Lisboa estimated that it would take two years to complete the project at a cost of $6.5 million. The fixed fee that is stipulated in the contract is $1.5 million. Lisboa chooses appropriately to account for this contract under the percentage-of-completion method.
During 2014, Lisboa incurred costs of $2.7 million related to the project. The estimated cost at December 31, 2014, to complete the contract is $4.9 million. Martinez was billed $600,000 under the contract.
Under the earnings approach, prepare a schedule to calculate the amount of gross profit that Lisboa should recognize under the contract for the year ended December 31, 2014. Show supporting calculations in good form.
Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
Relevant Tutors available to help