Question: Can someone please explain step-by-step how they got these answers for the percentage-of-completion method and the completed-contract method? I am having a difficult time figuring
Can someone please explain step-by-step how they got these answers for the percentage-of-completion method and the completed-contract method? I am having a difficult time figuring out how this was all calculated. Thank you so much!!!
Shanahan Construction Company has entered into a contract beginning January 1, 2014, 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.
| 2014 | 2015 | 2016 | ||||
| Costs to date | $270,000 | $450,000 | $610,000 | |||
| Estimated costs to complete | 330,000 | 150,000 | 0 | |||
| Progress billings to date | 270,000 | 550,000 | 900,000 | |||
| Cash collected to date | 240,000 | 500,000 | 900,000 |
(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.
Gross profit recognized in 2014: $ 135,000
Gross profit recognized in 2015: $ 90,000
Gross profit recognized in 2016: $ 65,000
(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.
Gross profit recognized in 2014: $ 0
Gross profit recognized in 2015: $ 0
Gross profit recognized in 2016: $ 290,000
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