P18-4B (Recognition of Profit and Balance Sheet Presentation, Percentage-of-Completion) On April 1, 2014, Pinkett Construction Company...

 

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P18-4B (Recognition of Profit and Balance Sheet Presentation, Percentage-of-Completion) On April 1, 2014, Pinkett Construction Company obtained a contract to build an museum. The museum was to be built at a total cost of $30,000,000 and was scheduled for completion by November 1, 2016. One clause of the contract stated that Pinkett was to deduct $25,000 from the $40,000,000 billing price for each week that completion was delayed. Completion was delayed 4 weeks, which resulted in a $100,000 penalty. Below are the data pertaining to the construction period. Costs to date Estimated costs to complete Progress billings to date Cash collected to date 2014 $ 4,500,000 25,500,000 2015 $12,500,000 18,750,000 6,200,000 15,800,000 5,000,000 15,000,000 2016 $32,000,000 -0- 39,900,000 39,900,000 Instructions (a) Using the percentage-of-completion method, compute the estimated gross profit recognized in the years 2014-2016. (b) Prepare a partial balance sheet for December 31, 2015, showing the balances in the receivables and inventory accounts. P18-4B (Recognition of Profit and Balance Sheet Presentation, Percentage-of-Completion) On April 1, 2014, Pinkett Construction Company obtained a contract to build an museum. The museum was to be built at a total cost of $30,000,000 and was scheduled for completion by November 1, 2016. One clause of the contract stated that Pinkett was to deduct $25,000 from the $40,000,000 billing price for each week that completion was delayed. Completion was delayed 4 weeks, which resulted in a $100,000 penalty. Below are the data pertaining to the construction period. Costs to date Estimated costs to complete Progress billings to date Cash collected to date 2014 $ 4,500,000 25,500,000 2015 $12,500,000 18,750,000 6,200,000 15,800,000 5,000,000 15,000,000 2016 $32,000,000 -0- 39,900,000 39,900,000 Instructions (a) Using the percentage-of-completion method, compute the estimated gross profit recognized in the years 2014-2016. (b) Prepare a partial balance sheet for December 31, 2015, showing the balances in the receivables and inventory accounts.

Answer rating: 100% (QA)

With of Completion you recognize gross profit in the same ratio that costs to date have to projected ... View the full answer