Question - UMU Contractors received a contract to construct a building for $10,000,000. Construction was begun in 2010 and completed in 2011. Cost and other data are presented below:
2010 2011
Costs incurred during the year $6,200,000 $4,000,000
Estimated additional costs to complete 4,100,000 0
Billings during the year 5,800,000 3,800,000
Cash collections during the year 5,300,000 4,000,000
(i) Assume that UMU uses the percentage-of-completion method for revenue recognition.
Required: Compute and show separately the amounts of gross profit (loss) recognized during 2010 and 2011 from the above contract.
(ii) Assume that UMU uses the completed contract method for revenue recognition.
Required: Compute and show separately the amounts of gross profit (loss) recognized during 2010 and 2011 from the above contract.