Question: Answer is bolded below. Please provide detailed explanation on how to solve this. Thank you. Black Bear Construction Company has a contract to construct a
Answer is bolded below. Please provide detailed explanation on how to solve this. Thank you.
Black Bear Construction Company has a contract to construct a $6,000,000 bridge at an estimated cost of $5,300,000. The contract is to start in July 2015, and the bridge is to be completed in October 2017. The following data pertain to the construction period.
| 2015 | 2016 | 2017 | |
| Costs to date | $1,325,000 | $3,780,000 | $5,430,000 |
| Estimated costs to complete | 3,975,000 | 1,620,000 | |
| Progress billings during the year | 1,200,000 | 3,200,000 | 1,600,000 |
| Cash collected during the year | 1,000,000 | 2,340,000 | 2,660,000 |
2. What amount of gross profit should Black Bear recognize in 2016 using the percentage-of-completion method?
$270,000
$245,000
$ 0
$315,000
3. What amount of gross profit should Black Bear recognize in 2017 using the percentage-of-completion method?
$150,000
$530,000
$169,000
$210,000
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