On June 15, 2013, Sanderson Construction entered into a long term construction contract to build a baseball stadium in Washington D.C. for $220 million. The expected completion date is April 1 of 2015, just in time for the 2015 baseball season. Costs incurred and estimated costs to complete at year end for the life of the contract are as follows ($ in millions):
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Required:
1. Determine the amount of gross profit or loss to be recognized in each of the three years using the percentage ofcompletion method.
2. How much revenue will Sanderson report in its 2013 and 2014 income statements related to this contract using the percentage of completion method?
3. Determine the amount of gross profit or loss to be recognized in each of the three years using the completed contract method.
4. Determine the amount of revenue, cost, and gross profit or loss to be recognized in each of the three years under IFRS, assuming that using the percentage of completion method is not appropriate.
5. Suppose the estimated costs to complete at the end of 2014 are $80 million instead of $60 million. Determine the amount of gross profit or loss to be recognized in 2014 using the percentage of completionmethod.