(Recognition of Profit on Long-Term Contract) Shanahan Construction Company has entered into a contract beginning January 1, 2017, 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. 2017 2018 2019 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 Instructions(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.
(Recognition of Profit on Long-Term Contract) Shanahan Construction Company has entered into a contract beginning January 1, 2017, 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. 2017 2018 2019 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 Instructions(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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(Recognition of Profit on Long-Term Contract) Shanahan Construction Company has entered into a contract beginning January 1, 2017, 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.
| 2017 | 2018 | 2019 | |
| 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 |
Instructions
(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.
(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.
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