The Kirby Construction Company was the low bidder on a specialized equipment contract. The contract bid was $5,400,000 with an estimated cost to complete the project of $4,800,000 . The contract period was 34 months , beginning March 1, 2014. The company uses the cost-to-cost method to estimate profits. A record of construction activities for the years 2014– 2017 follows: Actual Cost- Progress Billings Cash Year Current Year Receipts 2014 $2,800,000 $2,600,000 $2.200,000 2015 2,200,000 2,100,000 1,900,000 2016 600,000 700,000 700,000 2017 600,000 The estimated cost to complete the contract at the end of each accounting period is: 2014 $2,200,000 Novt na

The Kirby Construction Company was the low bidder on a specialized equipment contract. The contract bid was $5,400,000 with an estimated cost to complete the project of $4,800,000 . The contract period was 34 months , beginning March 1, 2014. The company uses the cost-to-cost method to estimate profits. A record of construction activities for the years 2014– 2017 follows: Actual Cost- Progress Billings Cash Year Current Year Receipts 2014 $2,800,000 $2,600,000 $2.200,000 2015 2,200,000 2,100,000 1,900,000 2016 600,000 700,000 700,000 2017 600,000 The estimated cost to complete the contract at the end of each accounting period is: 2014 $2,200,000 Novt na

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Use the percentage-completion method and show all calculations and explanation in detail.
Star Construction Corporation has a contract to construct a building for $10,950,000. The building is controlled by the customer throughout the term of the contract. Total costs to complete the building were originally estimated at $8,850,000. Construction commenced on 4 February 20×5. Actual costs were in line with estimated costs for 20×5 and 20×6. In 20×7, actual costs exceeded estimated costs by $150,000. Total construction costs incurred in each year were as follows: 20X5: $2,700,00020X6: $4,500,00020X7: $1,800,000 Progress billings based on the amount of work completed were collected each year. Star Construction uses the percentage-of-completion method. The percentage-of-completion is based on costs incurred compared with estimated total costs of the project. Company also billed the client and collected the following payments Year Billings Payments Received 20X5: $2,300,000 $2,100,000 20X6: $4,900,000 $4,700,000 20X7: $3,750,000 $4,150,000…
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Answer is $1,800,000. Please explain the reasoning and calculations
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