Cosky Construction Company is involved in a long-term construction contract to build an office building. The estimated
Question:
Cosky Construction Company is involved in a long-term construction contract to build an office building. The estimated cost is $60 million and the contract price is $90 million. Additional information follows:
Year Cash Collections Actual Costs Incurred
2012................$18,000,000...............................$12,000,000
2013..................30,000,000.................................20,000,000
2014..................15,000,000.................................10,000,000
2015..................27,000,000.................................18,000,000
......................$90,000,000...............................$60,000,000
The project is completed in 2015 as scheduled and all cash collections related to the contract have been received.
Instructions
Prepare a schedule to determine the revenue, expense, and gross profit for each year of the contract using the percentage-of-completion method. Round calculations to two decimal places.
Taking It Further
Assume instead that by the end of 2012, Cosky Construction had problems with the office building as it discovered that the foundation was leaking and it was not able to reliably estimate the costs to fix the foundation and complete the building. Would it still be appropriate to use the percentage-of-completion method? Explain.
Step by Step Answer:
Accounting Principles Part 3
ISBN: 978-1118306802
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow