Shanahan Construction Company has entered into a contract beginning January 1, 2014, 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.
|
|
2014
|
2015
|
2016
|
|
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.