On June 15, 2013, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington D.C. for $430 million. The expected completion date is April 1 of 2015, just in time for the 2015 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows:
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2013
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2014
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2015
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Costs incurred during the year
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$
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40
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$
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170
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$
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60
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Estimated costs to complete as of 12/31
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210
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140
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-
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Required:
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1.
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Determine the amount of gross profit or loss to be recognized in each of the three years using the percentage-of-completion method.
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2.
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How much revenue will Sanderson report in each of three years using the percentage-of-completion method?
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3.
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Determine the amount of gross profit or loss to be recognized in each of the three years using the completed contract method.
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4.
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Determine the amount of revenue, cost, and gross profit or loss to be recognized in each of the three years using the cost recovery method that is required by IFRS.
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5.
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Suppose the estimated costs to complete at the end of 2014 are $210 million instead of $140 million. Determine the amount of gross profit or loss to be recognized in 2014 using the percentage-of-completion method.
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