Whipporwill Ltd. (Whipporwill) is a small construction company in Alberta that recently signed a contract to build a recreation centre in a local community. The centre will have a swimming pool, arena, gym, fitness centre, and a small theatre.

Whipporwill will receive \($18,000,000\) from the city for building the centre and will have to pay the costs of construction from that amount. Construction will begin in September 2014 and is expected to be completed in June 2016. Whipporwill’s yearend is December 31. Whipporwill has estimated the construction costs for each year:

The town paid \($3,000,000\) when the contract was signed and will pay \($5,000,000\) on January 1, 2015, 2016, and 2017.

Required:
Calculate the amount of revenue and expense that Whipporwill would recognize in each year of the contract using the percentage-of-completion and zero-profit methods.
Assume the actual costs incurred equal the estimated costs.

Transcribed Image Text:

Estimated costs 2014 $1,500,000 2015 2016 Total $7,000,000 $4,400,000 $12,900,000