Perfectionist Construction Company was the low bidder on an office building cons
ID: 2468021 • Letter: P
Question
Perfectionist Construction Company was the low bidder on an office building construction contract. The contract bid was $9,000,000, with an estimated cost to complete the project of $7,000,000. The contract period was 30 months starting May 1, 2014. The company uses the cost-to-cost method of estimating earnings. Because of changes requested by the customer, the contract price was adjusted downward to $8,600,000 on May 1, 2015.
A record of construction activities for the years 2014-2017 is as follows:
Year Actual Cost-Current Year Progress Billings Cash Receipts
2014 $1,900,000 $2,500,000 $1,900,000
2015 3,600,000 3,400,000 3,100,000
2016 1,670,000 2,700,000 2,500,000
2017 1,100,000
The estimated cost to complete the contract as of the end of each accounting period is:
2014... $5,150,000
2015... 1,600,000
2016... 0
Calculate the gross profit for the years 2014-2016 under the percentage-of-completion method of revenue recognition. (Note: Round percentage to two decimal places for percentage completed.)
Explanation / Answer
2014 2015 2016 Contract Value 90,00,000 86,00,000 86,00,000 Actual Cost for the year 19,00,000 36,00,000 16,70,000 Actual cost incurred till last year 19,00,000 55,00,000 Cost to Complete 51,50,000 16,00,000 Total Cost 70,50,000 71,00,000 71,70,000 % of Completion 27.0% 77.5% 100.0% Contract Revenue till date 24,25,532 66,61,972 86,00,000 Contract Cost incurred till date 19,00,000 55,00,000 71,70,000 2014 2015 2016 Reveune for the current year 24,25,532 42,36,440 19,38,028 Less:- Cost incurred for the year 19,00,000 36,00,000 16,70,000 Gross Profit for the year 5,25,532 6,36,440 2,68,028
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