Ex. 18-111—Percentage-of-completion method.
Stiner Builders contracted to build a high-rise for $14,000,000. Construction began in 2007 and is expected to be completed in 2010. Data for 2007 and 2008 are:
2007 2008
Costs incurred to date $1,800,000 $5,200,000 Estimated costs to complete 7,200,000 4,800,000
Stiner uses the percentage-of-completion method.
Instructions
(a)How much gross profit should be reported for 2007? Show your computation.
(b)How much gross profit should be reported for 2008?
(c)Make the journal entry to record the revenue and gross profit for 2008.
Ex. 18-112—Percentage-of-completion and completed-contract methods.
On February 1, 2007, Nance Contractors agreed to construct a building at a contract price of $6,000,000. Nance estimated total construction costs would be $4,000,000 and the project would be finished in 2009. Information relating to the costs and billings for this contract is as follows:
|
|
2007 |
2008 |
2009 |
|
Total costs incurred to date |
$1,500,000 |
$2,640,000 |
$4,600,000 |
|
Estimated costs to complete |
2,500,000 |
1,760,000 |
-0- |
|
Customer billings to date |
2,200,000 |
4,000,000 |
5,600,000 |
|
Collections to date |
2,000,000 |
3,500,000 |
5,500,000 |
Instructions
Fill in the correct amounts on the following schedule. For percentage-of-completion accounting and for completed-contract accounting, show the gross profit that should be recorded for 2007, 2008, and 2009.
Percentage-of-Completion Completed-Contract
Gross Profit Gross Profit
2007__________ 2007 __________
2008__________ 2008 __________
2009__________ 2009 __________
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