Question: In 2016, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2018. Information related to the contract is as follows:
|
2016 |
2017 |
2018 |
| Cost incurred during the year |
$2,400,000 |
$3,600,000 |
$2,200,000 |
|
| Estimated costs to complete as of year-end |
5,600,000 |
2,000,000 |
0 |
|
| Billings during the year |
2,000,000 |
4,000,000 |
4,000,000 |
|
| Cash collections during the year |
1,800,000 |
3,600,000 |
4,600,000 |
|
Westgate Construction reports under IFRS and concludes that the percentage-of-completion method is not appropriate.
Required: 1. Calculate the amount of revenue and gross profit to be recognized in each of the three years
Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2016, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,000,000. Curtiss concludes that the contract does not qualify for revenue recognition over time. The building was completed on December 31, 2018. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows: At 12-31-2016 At 12-31-2017 At 12-31-2018 Percentage of completion 10 % 60 % 100 % Costs incurred to date $ 350,000 $ 2,500,000 $ 4,250,000 Estimated costs to complete 3,150,000 1,700,000 0 Billings to Axelrod, to date 720,000 2,170,000 3,600,000