contract is as follows: ring 2016 and was completed in 2018. Information relating to the cted to construct a factory building for $885,000. Costs incurred during the year Billings during the year Cash collections during the year Required: 2016 $350,000 380,000 360,000 2017 $245,000 2018 100,000 305,000 200,000 325,000 200,000 2016 a. Determine the amount of revenue, construction expense and gross profit to be recogn each year in 2016, 2017, and 2018. Show calculations. Completed contract method Revenue Construction expense Gross profit 2017 2018
contract is as follows: ring 2016 and was completed in 2018. Information relating to the cted to construct a factory building for $885,000. Costs incurred during the year Billings during the year Cash collections during the year Required: 2016 $350,000 380,000 360,000 2017 $245,000 2018 100,000 305,000 200,000 325,000 200,000 2016 a. Determine the amount of revenue, construction expense and gross profit to be recogn each year in 2016, 2017, and 2018. Show calculations. Completed contract method Revenue Construction expense Gross profit 2017 2018
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Problem 3: Magnum Construction contracted to construct a factory building for $885,000.
The project
was started during 2016 and was completed in 2018. Information relating to the
contract is as follows:
Costs incurred during the year
Billings during the year
Cash collections during the year
Required:
2016-
$350,000
380,000
360,000
Percentage of completion method
Revenue
Construction expense
Gross profit
a. Determine the amount of revenue, construction expense and gross profit to be recognized
each year in 2016, 2017, and 2018. Show calculations.
Completed contract method
Revenue
Construction expense
Gross profit
2016
2017
2018
$245,000 100,000
200,000
305,000
325,000 200,000
2016
2017
2017
2018
2018
b. Briefly explain why some companies use the Percentage-of-completion method?
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