Question
Shanahan Construction Company has entered into a contract beginning January 1, 2017, to build a parking complex. It has been estimated that the complex will
Shanahan Construction Company has entered into a contract beginning January 1, 2017, 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 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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