* Question 4 Penner Builders contracted to build a high-rise for $27,300,000. Co

Question

* Question 4 Penner Builders contracted to build a high-rise for $27,300,000. Construction began in 2014 and is expected to be completed in 2017. Data for 2014 and 2015 are: 2015 2014 $3,530,000 $10,036,000 Costs incurred to date Estimated costs to complete 14,120,000 9,264,000 Penner uses the percentage-of-completion method. How much gross profit should be reported for 2014? Gross profit How much gross profit should be reported for 2015? Gross profit Make the journal entry to record the revenue and gross profit for 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Question Attempts: 0 of 3 used Copyright © 2000-2015 by John Wiley & Sons, Inc. or related companies All rights reserved. http://edugen.wileyplus.com/edugen/shared/assignment/test/qprint.uni 11/10/2015

Explanation / Answer

(A)

Percentage complete   = $3530,000/ 17,650,000 = 20%

Profit for 2014        = $9,650,000 @20%            = $1,930,000

2015

Percentage complete ( $10,036,000/ 19,300,000) = 52%

Profit               = $8,000,000 @52%                        = $4,160,000

Less recognised in 2014                                        = (1,930,000)

Porfit to be reported in 2015                                  = $2,230,000

(c) Journal entry

Revenues on contract $27,300,000 Cost of contribution $17,650,000 Total profit $  9,650,000

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