Problem #2

Pedroni Construction Company has entered into a contract beginning January 1, 2107, 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 billing to date 270,000 550,000 900,000

Cash collected to date 240,000 500,000 900,000

Instructions:

1. Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period
2. Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period