Answered: percentage-of-completion method

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Accounting

percentage-of-completion method

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 26E

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

During the year 2020, Pop Construction Corp. began work on a contract for $3,700,000. Other details follow:

Costs incurred during the year $1,800,000
Estimated costs to complete as of December 31= 1,200,000
Billings during the year1,650,000
Collections during the year 975,000

Pop uses the percentage-of-completion method. For calendar 2020, Pop should report gross profit of?

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How much gross profit should be reported for 2021?