Shanahan Construction Company has entered into a contract beginning January 1, 2020, 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. 2020 2021 2022 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.
Shanahan Construction Company has entered into a contract beginning January 1, 2020, 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. 2020 2021 2022 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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Question
Shanahan Construction Company has entered into a contract beginning January 1, 2020, 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.
|
2020
|
2021
|
2022
|
|
|
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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