Question
Q2. Percentage-of-completion and completed-contract methods. On February 1, 2010, Marsh Contractors agreed to construct a building at a contract price of $6,000,000. Marsh estimated total
Q2. Percentage-of-completion and completed-contract methods.
On February 1, 2010, Marsh Contractors agreed to construct a building at a contract price of $6,000,000. Marsh estimated total construction costs would be $4,000,000 and the project would be finished in 2012. Information relating to the costs and billings for this contract is as follows:
2010 2011 2012
Total costs incurred to date $1,500,000 $2,640,000 $4,600,000
Estimated costs to complete 2,500,000 1,760,000 -0-
Customer billings to date 2,200,000 4,000,000 5,600,000
Collections to date 2,000,000 3,500,000 5,500,000
Instructions
a) Fill in the correct amounts on the following schedule. Compute the gross profit that should be recorded for 2010, 2011, and 2012 under the percentage-of-completion and completed-contract accounting method. Show your calculations.
Percentage-of-Completion Completed-Contract
Gross Profit Gross Profit
2010 ___________ 2010 ___________
2011 ___________ 2011 ___________
2012 ___________ 2012 ___________
b) Provide journal entries to record gross profit and revenue for 2010 and 2011 under the percentage-of-completion method.
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