Problem: XYX Builders contracted to build a high-rise for $14,000,000. Construction began in 2007 and is expected to be completed in 2010. Data for 2007 and 2008 are:
2007 2008
Costs incurred to date $1,800,000 $5,200,000
Estimated costs to complete 7,200,000 4,800,000
XYZ uses the percentage-of-completion method.
Instructions
Q1. How much gross profit should be reported for 2007? Show your computation.
Q2. How much gross profit should be reported for 2008?
Q3. Make the journal entry to record the revenue and gross profit for 2008.