Question
Perasso Construction entered into a fixed-price contract with Santos Associates on April 1, 2013, to construct an office building.The total contract price for construction of
Perasso Construction entered into a fixed-price contract with Santos Associates on April 1, 2013, to construct an office building.The total contract price for construction of the building is $5,000,000.The building was completed in 2015.Cost information for 2013 and 2014 were as follows:
20132014
Costs incurred during the year$400,000$2,200,000
Estimated costs to complete3,600,0002,600,000
Required:
1. Compute the gross profit or loss to be recognized during 2013 and 2014 applying the completed contract method.
2. Compute the gross profit or loss to be recognized during 2013 and 2014 applying the percentage-of-completion method.
3. Applying the percentage-of-completion method, how much revenue and cost of construction would the company report in the 2014 income statement?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started