Question: Answer is provided below. Please provide detailed explanation on how to solve this. Thank you. Black Bear Construction Company has a contract to construct a
Answer is provided 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 | $3,720,000 | $6,300,000 |
| Estimated costs to complete | 3,975,000 | 2,480,000 |
|
| 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 |
What amount of gross profit (loss) should Black Bear recognize in 2015, 2016, and 2017 using (1) the percentage-of-completion method, and (2) the completed contract method?
|
| 2015 | 2016 | 2017 |
| Percentage of completion method | $175,000 | -$375,000 | -$100,000 |
| The completed contract method | 0 | -$200,000 | -$100,000 |
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