Sherman Construction Company has entered into a contract beginning January 1, 2013 to build a parking complex for the city of Lancaster. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the city at $900,000. The following data pertain to the construction period.
2013 2014 2015
Costs to date $270,000 $450,000 $610,000
Estimated costs to complete 330,000 150,000 -0-
Progress billings to date 270,000 550,000 900,000
Cash Collected to date 240,000 500,000 900,000
(a) Using the percentage of completion method, compute the estimated gross profit that would be recognized during each year of the construction period.
(b) Using the completed contract method, compute the estimated gross profit that would be recognized during each year of the construction period.