On June 21, 2011, Three Rivers Concrete Company signed a contract with Premier Power Incorporated to construct a dam over a river in northern British Columbia. The contract price was $42 million, and it was estimated that the project would cost Three Rivers Concrete $27 million to complete over a three-year period. On June 21, 2011, Premier Power paid Three Rivers Concrete $1.2 million as a default deposit. In the event that Premier Power backed out of the contract, Three Rivers Concrete could keep this deposit. Otherwise, the default deposit would apply as the final payment on the contract (assume, for accounting purposes, that this is treated as a deposit until contract completion). The other contractual payments are as follows:
Date Amount
Oct. 15, 2011……………………….. $14,280,000
Apr. 15, 2012……………………….. 6,120,000
Dec. 15, 2012……………………….. 8,160,000
Mar. 15, 2013……………………….. 7,956,000
Aug. 10, 2013……………………….. 4,284,000
Total………………………..………... $40,800,000
Estimated construction costs were as follows:
YearAmount
2011………………………………..$12,150,000
2012……………………………….. 9,450,000
2013……………………………….. 5,400,000
Total………………………………..$27,000,000
The contract was completed on September 30, 2013. Solid Concrete closes its books on December 31 each year.
Required:
Calculate the revenue, expense, and profit to be recognized in each year, using the percentage of completion method.