On June 15, 2011, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington D.C. for $220 million. The expected completion date is April 1 of 2013, just in time for the 2013 baseball season. Cost incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):
2011 2012 2013
Cost incurred during the year $40 $80 $50
Estimated cost to complete as of 12/31 120 60 ---
Required:
1- Determine the amount of gross profit or loss to be recognized in each of the three years using percentage of completion method.
2- How much revenue will San report in its 2011 and 2012 income statement related to this contract using the percentage-of completion method?
3- Determine the amount of gross profit or loss to be recognized in each of the three years using completed contract method.
4- Determine the amount of revenue, cost and gross profit or loss to be recognized in each of the three years under IFRS, assuming that using the percentage-of completion method is not appropriate.
5- Suppose the estimated costs to complete at the end of 2012 are $80 million instead of $60 million. Determine the amount of gross profit or loss to recognized in 2012 using the percentage-of completion method.