Question: Percentage of Completion Method
Flames Corp. contracted to build a bridge for $5,000,000. Construction began in 2017 and was completed in 2018. Data relating to the construction are:
2017 2018
Costs incurred $1,620,000 $1,400,000
Estimated costs to complete 1,380,000 -
Required: Using the percentage-of-completion method and the cost-to-cost basis, refer to BE6-30, E6-30, study guide E6-6 as a guide.
a) How much revenue should be reported for 2017? Show your calculation.
b) Prepare the journal entry to record progress billings of $1,700,000 during 2017.
c) Prepare the journal entry to record the revenue and gross profit for 2017.
d) How much gross profit should be reported for 2018? Show your calculation.