Recognition of Profit on Long-Term Contract Shanahan Construction Company has entered into a contract beginning January 1, 2010, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.

Instructions

(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.

(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.

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2010 2011 2012 Costs to date Estimated costs to complete Progress billings to date $270,000 $450,000 $610,000 -0- 900,000 270,000 240,000 550,000 Cash collected to date 500,000 900,000